5 W’s of Reverse Mortgages

Trying to find out more about reverse mortgages can often be difficult and stressful, with plenty of information-overload. We created the “5 W’s” of Reverse Mortgages to answer some of your questions about a reverse mortgage.

Looking for more answers? Send a message here and I’ll get back to you with your reverse mortgage needs.

Who qualifies for a Reverse Mortgage?

Homeowners who are at least 62 years old and occupy the home as their principal residence with substantial equity, it is advised to have at least 40%.

Use this Reverse Mortgage Calculator to help check your eligibility.

What is Reverse Mortgage?

You may have heard about the Home Equity Conversion Mortgage (HECM) program, better known as a reverse mortgage, by friends and family.  A reverse mortgage allows senior homeowners (borrower) to use their home’s equity as collateral for a loan. You retain ownership of your home and are required to keep your homeowners insurance and property taxes current.

When is the Reverse Mortgage due?

Generally, the loan is due when one of the following occur:

• The borrower sells the home.
• The borrower does not live in the house for more than 12 months consecutively.
• The borrower passes on.
• The borrower does not stay current on their taxes and insurance.

Where are the Reverse Mortgage funds distributed?

The funds from a reverse mortgage are disbursed in one of four ways:

• The borrower can receive monthly disbursement over a certain term (ex.$500 a month for 60 months).
• The borrower can get a lump sum payment.
• The borrower can use the funds as a revolving line of credit.
• The borrower can have a combination of monthly disbursements, lump sum payment and a revolving line of credit. (ex. Lump sum payment of $20,000 and monthly disbursement of $250 for 60 months)

(Edit: This post was originally posted January 15, 2013. In September 2013, HUD has announced that there will be changes to the program, including putting a limit on how much money a borrower can borrow in the first year. Continue to read ReverseMortgage-Blog.com for more updates and news.)

​*It is important to note that money received from a loan is not considered taxable income, but it is best to consult a tax advisor.

Why get a Reverse Mortgage?

The money received from a reverse mortgage can be used in whatever way YOU choose.  You can pay for medical bills, home repairs or even buy a vacation home.  Either way, you determine how the money is spent and you still own the home.  As long as it is your primary residence you do not have to repay the loan, just keep current on taxes and insurance.

Our current economic situation has had an effect on everyone, especially seniors that lost their savings in the crash.  A reverse mortgage can give you the cash you need to live comfortably in your golden years.

 

Read other related articles:

“How’s” of a Reverse Mortgage Loan

Reverse Mortgage Guide

 

About the Author:

I have been working in the reverse mortgage industry for 20-plus years. My goal is to provide consumers the most up-to-date and relevant information about the reverse mortgage industry and how it can affect them.

Thanks for reading!

-Alan F.

Image courtesy of Stuart Miles /FreeDigitalPhotos.net