Learning

A reverse mortgage is a loan that converts a portion of your home equity into cash.  If you've ever had a HELOC then you're already familiar with the concept of tapping into your equity, or, said another way, borrowing against the value of your home.  Think of it as accessing the savings you've built up in your home for years.

Reverse mortgages also have a lot of special characteristics and safeguards.  Here are some highlights: 

• Unlike a traditional mortgage where you make monthly payments to your lender, a reverse mortgage pays you.  But even though monthly payments are not required, most professionals suggest making payments when possible because it can create a line of credit that increases over time!

• There is no pre-defined loan term (15 year, 30 year, etc.).  If you get the reverse mortgage when you are 62 and live to 142, you could potentially take advantage of the reverse mortgage for 80 years 😯.  The loan is typically repaid when the last surviving borrower sells the home, moves out, or passes away.   Like other home loans, a reverse mortgage will also be due if the borrower fails to pay property charges (taxes, insurance, HOA/Condo dues, etc.), or fails to maintain the home.  

• Reverse mortgage borrowers are protected against being upside down when the loan is due.  This non-recourse feature allows you or your heirs to settle the debt for the lesser of the loan balance or the property value. 

• Eligibility is straightforward.  Here are the basic requirements. 

• 👱At least one spouse must be 62 years old (55+ in select states). 

• 👱You must be a U.S. citizen or lawful permanent resident.

• 👱You must not be delinquent on any federal debt. 

• 👱You must have sufficient income/assets to continue paying your property charges (insurance, taxes, HOA fees, etc.).

• 🏡The home must be your primary residence. 

• 🏡The home must meet basic FHA requirements for safety, security, and marketability.

• 🏡Condos must be FHA approved or be willing to provide documentation for approval.  

• 🏡Manufactured homes must have been constructed on or after June 15, 1976 and be attached to a permanent foundation.

• ❌MYTH: The bank takes ownership of my home.
  ✅FACT: You retain the title and full ownership of your home, just as you would with a traditional mortgage. 

• ❌MYTH: I can be forced to leave my home.
  ✅FACT: As long as you meet the loan obligations like paying taxes, paying insurance, maintaining the home, and living in the home as your primary residence, you can live there for the rest of your life.  We cannot force you to leave your home for living longer than we expected!  

• ❌MYTH: My children will be stuck with a huge bill.
  ✅FACT: A reverse mortgage is a "non-recourse" loan.  This means the amount you owe the lender can never be more than the value of the home when it's due.  No other assets are at risk. Your heirs can choose to pay off the loan and keep the home or sell it to repay the loan.

The reverse mortgage process includes several consumer protections to ensure you are making an informed decision: 

1. Education & Learning: The first step is what you're doing now! Learning from a trusted source.

2. Independent Counseling: You are required to meet with a HUD-approved counselor to discuss the pros, cons, and alternatives. This is for your protection.

3. Application & Financial Assessment: We'll complete the application and an assessment to confirm your ability to manage property-related expenses.

4. Appraisal & Underwriting: An independent appraiser determines the value of your home, and the loan is reviewed for approval.

5. Closing: Once approved, you sign the final documents and decide how you want to receive your funds (lump sum, monthly payments, or a line of credit).