| A
reverse mortgage is a loan against the equity in your home
that provides you cash advances, but requires no mandatory
monthly re-payments during the life of the loan. If the interest
is unpaid, it is allowed to accrue against the value of your
home. If you do choose to pay any portion of the interest,
it may be deductible against income, as would any mortgage
interest.
You must be at
least 62, own and live in, as a primary residence, a home
[1-4 family residence, condominium, co-op, permanent mobile
home, or manufactured home] in order to qualify for a reverse
mortgage. There are no income, asset or credit requirements.
It is the easiest loan to qualify for.
The proceeds from
a reverse mortgage are tax-free and available as a lump sum,
fixed monthly payments for as long as you live in the property,
a line of credit; or a combination of these options. These
proceeds can be used for any purpose you wish:
- Daily
living expenses
-
Home repairs and improvements
-
Medical bills and prescription drugs
-
Pay-off of existing debts
-
Travel
-
Long-term care and/or long-term care insurance
-
Financial and estate plans
-
Gifts and trusts
-
Life insurance
The amount of reverse
mortgage benefit for which you may qualify, will depend on
your age at the time you apply for the loan, the reverse mortgage
program you choose, the value of your home, current interest
rates, and for some products, where you live. As a general
rule, the older you are and the greater your equity, the larger
the reverse mortgage benefit will be (up to certain limits,
in some cases). The reverse mortgage must refinance any outstanding
liens against your property before you can withdraw additional
funds.
The loan is not
due and payable until the borrower no longer occupies the
home as a principal residence (i.e. the borrower sells, moves
out permanently or passes away). At that time, the balance
of borrowed funds is due and payable, all additional equity
in the property belongs to the owners or their beneficiaries.
There are three
reverse mortgage loan products available, the FHA - HECM (Home
Equity Conversion Mortgage), Fannie Mae - HomeKeeper®,
and Financial Freedom Advantage® Cash Account programs.
The costs associated
with getting a reverse mortgage are similar to those with
a conventional mortgage, such as the origination fee, appraisal
and inspection fees, title policy, mortgage insurance and
other normal closing costs. With a reverse mortgage, all of
these costs will be financed as part of the mortgage prior
to your withdrawal of additional funds.
You must participate
in an independent Credit Counseling session with a FHA-approved
counselor early in the application process for a reverse mortgage.
The counselor's job is to educate you about all of your mortgage
options. This counseling session is at no cost to the borrower
and can be done in person or, more typically, over the telephone.
After completing this counseling, you will receive a Counseling
Certificate in the mail which must be included as part of
the reverse mortgage application.
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The
above information was provided by DML Mortgage, (914) 455-3700.
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