Reverse Mortgage Loan Blog

For people over the age of 62 reverse mortgages can help get equity out of your home without having large loan payments. Many senior citizens have taken out reverse mortgages in order to pay for long term care insurance, home improvements, or for a steady monthly income.

For whatever reason you may be considering a reverse mortgage here are some important facts to consider before making your decision:

• You have to be 62 or older to take a reverse mortgage.
• You have to own your home completely or have a very small balance due on the loan. In the case you still owe something on your home then when you take the reverse mortgage loan the balance of your previous mortgage will be paid in full before you get any of the equity monies from the reverse mortgage.
• You get to remain living in your home. The mortgage lender that holds the reverse mortgage lien on your home can not kick you out or sell your home out from under you. As long as you remain living in the home and keep it in good repair you keep your home as your own.
• You must keep your home in good condition and keep all monies owed on the home current. If you let the house go when it needs improvements then the value of the home decreases and the lender can foreclose the lien on your reverse mortgage in order to get their money back. You must also continue to pay the property taxes or the lender will have the right to foreclose. If you do not pay the property taxes then a tax lien can be sold on your home and the lender wants to be the only lien holder on the property so they may foreclose if you become delinquent on your property taxes.
• You must continue to live in your home. If you move to a new residence then your lender will sell the home and recapture their loan from the proceeds. As long as you live in the home and comply with the terms of the reverse mortgage loan then you can not be evicted from the property. In the case you are sick or need to be hospitalized for a period of time the lender understands these circumstances. Usually you can be absent from your home for up to 12 months before the lender will consider you no longer residing in the home.
• You may or may not lose all of the equity in your home. You most likely spent 30 years or more of your life making monthly mortgage payments and when you take a reverse mortgage you are depleting some or all of that savings in equity. The bank looks at your age and lifestyle in order to determine your life expectancy. Then they figure how long it will be before they get their investment back and with this information they decide on your interest rate and fees charged for your reverse mortgage. If they charge you a monthly or yearly ongoing service fee and you are in the home longer than expected then all of the equity value in your home may belong to the bank by the time the home is sold.
• You can use the money for anything you want, and it can be distributed to you in a variety of ways. When you take a reverse mortgage you can use the money to travel, buy a new car, pay for college or a wedding, or for more practical expenses like a monthly income increase, to pay for property tax bills, or for purchasing long term care insurance. The money from your reverse mortgage can be distributed in one large lump sum, as a credit account that you only use when you need, as a monthly check, or a combination of these. Just remember that if you choose the credit option or the monthly income option the lender will charge you a monthly service fee for the maintenance of your account. These fees can be costly and add up quickly so that by the time your home is sold any additional equity may belong to the bank.

You should consider all of these factors if you are thinking about taking a reverse mortgage on your home. Before you make a decision talk to your loved ones and try to come up with some alternatives.

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