Reverse Mortgages
What is a Reverse Mortgage? Is it right for
me?
| A reverse mortgage does not affect regular Social Security or Medicare benefits |
Eligible property types include single-family homes, manufactured homes built after June 1976, qualified condominiums, and townhouses. The funds from a reverse mortgage can be used for anything: daily living expenses; home repairs or modifications; health care expenses, including prescription drugs or in-home care; to pay-off of existing debts; for lifestyle enhancement; prevention of foreclosure; and other needs. There are no income or medical requirements to qualify. You may be eligible for a reverse mortgage even if you still owe money on a first or second mortgage.
What are my payment options?
You can choose how to receive the money from a reverse mortgage. The options are: all at once (lump sum); fixed monthly payments (for up to life); a line of credit; or a combination of these. The most popular option – chosen by more than 60 percent of borrowers – is the line of credit, which allows you to draw on the loan proceeds at any time.
The amount of money you get from a reverse mortgage depends on several
factors, including: your age, type of reverse mortgage selected, appraised
home value, current interest rates, and – sometimes – where
you live. In general, the older you are and the more valuable your home
(and the less you owe on your home), the more money you get.
The funds from a reverse mortgage are tax-free; it's your money,
not additional income. A reverse mortgage does not affect regular Social
Security or Medicare benefits. To assess the impact, if any, on other
federal or state assistance or medical programs, you may wish to consult
with your local Area Agency on Aging, a reverse mortgage lender, or a
tax attorney.
Mandatory Counseling
Before applying for a reverse mortgage, you must first meet with a counselor. A list of approved counseling agencies nationwide is posted online by the U.S. Department of Housing and Urban Development. Or, you can schedule a counseling session with an AARP-approved telephone counselor at 1-800-209-8085. The counselor's job is to educate you about reverse mortgages, to inform you of other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product best fits your needs.
Paying Back Your Loan
No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out. The amount owed can never exceed the value of your home. Furthermore, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.