Ten Great Facts About Reverse Mortgages
1. A reverse mortgage has no income,
credit, or health requirements.
2. The lender will not own your home.
You and your family or your estate continue to
retain ownership of your home. The lender does
not take control of the title. The lender's
interest is limited to the outstanding loan
balance.
3. Reverse mortgage borrowers may remain
in the home for as long as they wish.
However, should they decide to sell the home for
any reason, the loan would then become due and
payable.
4. Reverse mortgages do not require any
monthly payments. The borrower is
responsible for payment of taxes, insurance, and
general upkeep of the home and nothing more.
5. Your heirs will not be left to repay
the loan out of their own pockets. The
reverse mortgage is a non-recourse loan. This
means that the lender can only derive repayment
of the loan from the proceeds of the sale of the
property. You or your heirs can never owe
more than the value of the home, regardless of
the loan balance. The same rule applies if a
catastrophe struck and the value of the home is
reduced.
6. You may have a mortgage or other debt
on your home and receive a reverse mortgage.
However, the mortgage or debt must be paid off
first with the proceeds of the reverse mortgage,
meaning that the debt will simply reduce the
amount of money that you can borrow. Many people
actually get a reverse mortgage to pay off their
homes and to get rid of their monthly payments
forever.
7. You can get a reverse mortgage and
still have money left over to pass on to your
children. You can choose how much to borrow.
Realize that your property will continue to
appreciate (the whole value of the estate) and
you pay interest on only the smaller amount
borrowed. Please consult your representative for
amortization tables that might apply to your
specific situation and to find out how much you
could still leave as inheritance.
8. You can still decide to sell your
house. If you do decide to sell, the reverse
mortgage is like any other loan that must be
paid off at closing. There are no restrictions
on prepayment or penalties for paying off your
loan or selling your home.
9. Your loan terms will not change, unless
you choose to refinance. A reverse mortgage
is secured by two deeds of trust. Once executed,
the terms are defined and cannot be changed as
long as the deeds remain in force.
10. Your Social Security,
Medicare/Medicaid benefits will not necessarily
decrease. Generally, the money from a
reverse mortgage is considered borrowed money
and not income. For some programs, monthly draws
must be spent and not accumulated, but for most
the money is not considered disqualifying.
Please consult with an advisor or your local
Agency for Aging for your specific situation.
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