1 Minute Recap of a Reverse Mortgage
So often, people ask me, "What is a Reverse Mortgage." My brief answer about how a reverse mortgage works is this:
Someone qualifies for a Reverse Mortgage
- When they are age 62 or more
- Own their own home or buying a home
- It’s their primary residence
- As of April 27, 2015, HUD has established financial and credit qualifying guidelines.
This is it for the Reverse Mortgage requirements. They can then take tax-free money out of the home without making monthly payments.
That is sort of the reverse of it; we are paying them rather than them paying us.
They do pay us back when they
- Or pass away
They can then take money out of a Reverse Mortgage in three ways.
- They can take a lump sum; meaning all the money up front. We use this choice when the borrower has an existing mortgage or equityline. That has to go away as part of the process.
- They can choose a line of credit; sort of like a jumbo credit card that they can draw from as needed but only are charged interest on the part they actually use.
- Or they can take monthly payments.
- Or they can take a combination of all three.
- The exception is to the fixed rate choice (which has only appeared in the last couple years) which requires them to take the maximum allowable (60% of the principle limit or required payments, such as a mortgage, plus 10%) up front and begin interest rate accumulation on the full amount immediately.