10 Facts About Reverse Mortgages You Need to Know

Confused about reverse mortgages? You're not alone. With so much conflicting information out there, it can be challenging to understand what they are and how they work. This post aims to clear up the confusion by offering ten essential facts about reverse mortgages, providing balanced insight whether you are considering one or exploring other options.

Reverse Mortgages Use Your Home’s Equity

Reverse mortgages allow homeowners to borrow against their home equity, receiving money from the lender. The lender recoups this money once the home is sold, the owner moves, or passes away.

Choose How to Receive Your Money

You can take the funds as a lump sum or in monthly installments. A lump sum may be preferable for significant immediate expenses, while monthly installments can provide a steady income stream.

Types of Reverse Mortgages

There are three types: home equity conversion mortgages (HECMs), single-purpose reverse mortgages, and proprietary reverse mortgages. HECMs are the most popular and versatile option, usable for any purpose.

You Still Need to Pay Property Taxes and Insurance

Reverse mortgages do not eliminate the need to cover ongoing property expenses like taxes and insurance. Lenders require borrowers to keep the home in good condition and remain current on these payments.

Your Home Must Be Your Primary Residence

Reverse mortgages are contingent on the home being the borrower’s primary residence. Extended absences or moving away could trigger repayment earlier than expected.

You Will Still Own Your Home

Taking out a reverse mortgage doesn’t transfer ownership to the lender. The homeowner remains the titleholder.

No Monthly Mortgage Payments

One of the main advantages is the lack of monthly mortgage payments, making this option appealing for retirees or those on fixed incomes.

Federal Debt Delinquencies Can Disqualify You

Being delinquent on federal debts, like unpaid taxes or federal loans, can prevent you from qualifying for a reverse mortgage.

You Must Have Paid Off (or Nearly Paid Off) Your Home

Substantial equity in the home is required, typically meaning the home is either fully or nearly paid off.

Age Requirement: 62 Years or Older

Reverse mortgages are only available to those aged 62 and older. For younger individuals, consider alternatives like a home equity line of credit (HELOC).

Reverse mortgages can be a helpful tool for some, but it's important to understand the key facts before moving forward. Now, with a better grasp of how they work, you can make a more informed decision. Get in touch today for more personalized advice or a consultation to determine whether a reverse mortgage is the right option for your situation.