The Ins and Outs of Understanding “the basics” of a Reverse Mortgage

In the last 60 days I’ve had 2 clients call me about looking into a reverse mortgage. I am not sure if I even shared with most that I actually DO offer this product and service.

First of all the Reverse Mortgage is NOT your traditional type of mortgage product. It does not follow the basic guidelines of lending, so most lenders do not offer it.  Secondly, it does require that the loan originator has taken some additional courses and classes and stays up to date on the rules and regulations that go along with this product.  I decided early last year, to get educated on this product because it started coming up in a lot more loan product discussions.  The reverse mortgage product basically allows you to take a portion of your equity in your home and help free up cash or income during your retirement years.  It’s a non-recourse loan, so if qualified, payments are also not required.  The title stays in the borrower/borrowers name.  The loan has certain triggers that do require the loan to be paid back.

The basic qualifications are:

• age of the borrower (must be 62 years or older)

• equity in the property vs. value of the property

• Property must be owner occupied (no 2nd homes or investments)

Let me give you an example of a qualified person.

Let’s say you are 65 years of age and just retired.  Your home is worth $300,000.00 and you owe only $40,000.00 on the home.  You plan on living in your home but want your mortgage to go away and have that extra cash for retirement to travel.  You should qualify.

The basic reasons to get a reverse mortgage:

• No repayment of the loan as long as your occupy your home
• Frees up your equity trapped in your home for your benefit
• Social Security and Medicare benefits are not affected by reverse mortgages
• You retain the title to the deed of your home and you may sell later if need be.

Using the example from above,

the homeowner could free up quite of bit of their equity to eliminate the mortgage payment, have free income to travel and put some extra money away for a rainy day.  It helps give comfort during those retirement years.

Now again, I will be the first to say that this product is NOT right for everyone, but for others with certain situations, this product can be a great option.