So, what is a reverse mortgage and why would your want one?
First let me explain, that I'm a real estate professional who specializes in selling homes in age-restricted adult communities.
In my day-to-day business activities I meet homeowners who either need money for an unexpected reason, or need money to make improvements to their home, but they don't have the ability to borrow and repay a traditional loan.
Sadly, many of these folks end up thinking that the only way they can obtain the money they need is by selling their home. And, while they'd prefer not selling, they believe it's their only solution
I guess if I was a heartless wretch, or didn't know of any other solution, I could list their home, get it sold, pocket my commission, and not give them a second thought.
But, because it's one of my essential responsibilities as a real estate broker (and even more so as a human being) to do my best to HELP people, I keep up-to-date on alternatives that may help people in this situation to get the money they need WITHOUT having to sell their home. And, a reverse mortgage is a potential solution.
The Reverse Mortgage
What it is.
A reverse mortgage is exactly what it sounds like; a loan. But, it's not repaid on a monthly basis as a traditional mortgage loan. Let me explain.
Assuming you borrowed money using a mortgage loan to buy your home, after living in there for several years, you
either paid down or paid off that loan. In either case, you built up equity in that home (which is the difference between what you owe and the value of your home).
Without getting deep into the weeds, a reverse mortgage is a loan that has no monthly payments and won't be repaid until the homeowner either sells the home or passes on.
In the event of the homeowner's death, their estate will sell the property and repay the balance of the reverse mortgage. Any remaining proceeds will be returned to the estate.
What it's not.
A reverse mortgage is not a scheme to deceive the borrower. It's not something that cannot be paid off just like any other mortgage loan. And, it's not designed to undermine the ownership rights of the homeowner.
A reverse mortgage was created solely for homeowners who are at least 62 years old, who have at least 50% equity in their home, and wish to convert part of their equity into cash without having to sell their home.
The amount of money a homeowner can obtain from a reverse mortgage is based on several factors, including the owner's age, the amount of equity in their home, whether or not it's their primary residence, and a few other factors.
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Different Types of Reverse Mortgages
Just as there are several different types of traditional purchase money mortgages (mortgage loans used to buy a property), there are also several different types of reverse mortgages. Here's a brief overview.
Home Equity Conversion Mortgages, or HECM, are Federal Housing Administration (FHA) backed loans only available through FHA approved lenders.The most popular type of reverse mortgage, the funds from this type of loan can be used for any purpose, but require the borrower to take HUD (Housing and Urban Development) approved counseling. There are loan amount limits and typically have higher up-front costs.
Proprietary Reverse Mortgages are privately funded loans that tend to have higher loan amount limits and are a benefit to owners of high-priced homes.
Single-Purpose Reverse Mortgages are relatively uncommon as they're typically only offered by non-profit organizations, or state and local government agencies. These loans are typically for smaller amount of money and are required to be used for a specific purpose, such as a home remodeling project.
Is a Reverse Mortgage for You?
I do not make mortgage loans. And, I'm not going to try to convince you to do anything.
My only purpose is to provide you a free, no-obligation professional service to help you make the right decision for your specific situation.
So, if you need or want money for any reason whatsoever and you don't want to sell your home, give me a call. And, I'll give your as much information as I have to help you accomplish that goal.