Reverse Mortgages

Available in the United States to people age 62 and over, a reverse mortgage releases home equity as one lump sum or as multiple payments. Repayment is deferred until the home is sold or the owner can no longer live there.

Reverse Mortgage Qualifiers

• The buyer must be 62 years old
• The borrower must pay off any existing mortgages with proceeds from the reverse mortgage or other resources
• Some types of dwellings do not qualify
• Some types of dwellings (mobile homes) have special requirements
• Third party, Department of Housing and Urban Development (HUD) approved financial counseling, must be completed by the borrower so he knows how all aspects of a reverse will affect him

Reverse Mortgage Money

Five primary factors determine how much money the consumer will receive:

• The appraised property value, if any safety repairs need to be made and whether or not there are liens on the home
• The interest rate
• The age of the borrower (the older he is, the more money he will receive)
• Whether the payment is taken as a lump sum or in payments. Taking the cash as a lump sum will incur the highest interest rates. But they get the cash right away. Monthly payments are structured so the borrowers receive them as long as they live.
• The value of the property against the national loan limit set by HUD

The money received from reverse mortgages is not taxable. Also, it doesn’t affect Social Security or Medicare benefits.

If the homeowner doesn’t remain current on taxes or insurance, it could result in a default on the reverse mortgage.

Steve Wyrostek -HomeLoans.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.