What is a Reverse Mortgage?
By Stuart Simpson
stated, a reverse mortgage is a loan that enables homeowners (age
62 and older) to convert part of the equity in their home into
a tax-free income without having to sell the home, give up the
title, or take on a new monthly mortgage payment. More and more
homeowners are using this to supplement their retirement income,
pay for health care, modify their home, or just get some cash
for emergencies. Since this is a new product, some people have
misconceptions of what a reverse mortgage is. The bank doesn’t
give you money and take your house. Let’s look at some of
the most common questions.
reverse mortgages for desperate people? No. It is an excellent
financial planning tool used from people of all walks of life.
do I qualify? You must be 62 or if both parties are on the mortgage,
then you both must be at least 62. And, you must have equity in
if I still owe on my home? You may still qualify even if you have
a balance on your first mortgage. The proceeds must be used to
pay off the mortgage, first.
much can I get? This depends on several factors such as, the age
of your home, the value, your age at the time of closing, and
it just monthly payments? No. You can get a lump sum, line of
credit, monthly payments or a combination of monthly income and
a line of credit.
won’t I have to pay taxes on these monthly payments to the
government? No. The funds are tax-free. Its your money, not additional
I seek a lawyer or receive some counseling before I get a reverse
mortgage. Yes. You must be counseled before receiving a reverse
mortgage. You don’t have to talk to a lawyer or accountant,
but it would be advised.
owns the title to my house? You still own the title.
happens when I die? Once your home is passed on to your heirs,
the mortgage becomes due. Your heirs may pay the mortgage and
keep the home or sell the home and pay off the home. They may
keep any excess sales proceeds.
if I owe more than the house is worth? You can’t. Your repayment
amount will never exceed the value of the home at the time the
loan comes due. Also, there are no prepayment penalties.
if I move? If you move, then the mortgage becomes due and must
can I learn more? The National Reverse Mortgage Lenders Association
Simpson has a neat mortgage calculator FREE to use. Try it out