1. Age matters! A reverse mortgage is a loan for homeowners who are at least 62 years old and allows them to turn the equity in their home into cash. The reason it is called a reverse mortgage because payments are made to the borrower instead of being paid to the lender.

 

  1. No spending restrictions! There are no limits or restrictions how you use the money when cashing in on a reverse mortgage. It was created as a way for the elderly with limited incomes to be able to pay living expenses or healthcare costs, but there’s no rule that says that’s how money must be spent.

 

  1. First and foremost: In order to have a reverse mortgage on a home, there can be no other outstanding mortgages on the property.

 

  1. Primary Residence Only: The home used for a reverse mortgage must be the main residence for the borrower so second or vacation homes are not eligible.

 

  1. Repayment: The loan is not due until the home is sold or vacated so as long as you live in the home, you are not required to make any payments on the loan.

 

  1. There are two types of reverse mortgages:
  • Home Equity Conversion Mortgage-This is not a government loan, but it is insured by the Federal Housing Administration. Although they are not a government loan, there are certain regulations that are associated with this type of mortgage.
  • The second type is a Proprietary Reverse Mortgage. These are insured privately by the individual company that provides them. Although privately insured, the companies that provide these types of mortgages will have similar requirements as an HECM, but might be more flexible in some aspects.

 

  1. Once the reverse mortgage is secured, you must keep your other finances like taxes and insurance up to date. Also if there are any other fees associated with the property, they must be kept up to date as well. The property also must be kept in good condition and any repairs that need to be made are the responsibility of the borrower.

 

  1. Ownership Details: In a reverse mortgage, the owner stays on the title and owns the home. The lender never takes over as the owner of the home.

 

  1. Borrowing Rules:
  • The amount that can be borrowed is limited for the first year after closing. They are not able to take more than sixty percent of the amount that is available in the first twelve months. After that time period, the full amount is then accessible.
  • A lender is also required to do an assessment of the borrower to make sure that it makes sense financially and that the borrower will be able to keep up with any other financial obligations associated with the property in the future.
  1. The amount which the borrower is eligible for is also determined by the age. The older the borrower, the more they are typically eligible to receive. Other factors that are considered are the value of the home as well as current interest rates.

 

Contact Us Today!

If you are thinking about a reverse mortgage, now or possibly in the future, we at JZ Mortgages want to provide you with all the information necessary so that you are making the best decision possible. Please give us a call today!