A reverse mortgage is a loan for homeowners over 62 who have equity in their homes. The property must be the homeowners primary residence; not a second home or investment property. It is called a reverse mortgage because the homeowner receives a check from the mortgage company instead of making a payment to the mortgage company. A reverse mortgage may be used for either a purchase or a refinance of an existing home.
The money is tax free as it is proceeds from a loan and not considered income. The loan does not have to be paid off as long as the homeowner lives in the home. With a reverse mortgage the homeowner does not have to qualify for the mortgage or worry about credit issues. The homeowner may use the funds for anything they desire: in-home care, remodeling, a new car, etc.
Homeowners are required to take a counseling class, prior to closing the loan, to make sure they understand all of the benefits and responsibilities of a reverse mortgage. The program is designed for those who plan on staying in their homes for an extended period of time. It is not meant for borrowers who plan on moving in the near future. Homeowners may will the property to whoever they wish, but they may not change the title after taking out a reverse mortgage.
A reverse mortgage is a non-recourse loan. This means that the house pays off the loan, not the homeowner or heirs.
Is a reverse mortgage right for you? That depends on your individual circumstances. Feel free to call for a complimentary consultation.
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