How Does a Reverse Mortgage Work?

Are you a senior homeowner looking for a way to get extra funds during your retirement years? Well, you may have heard about a reverse mortgage, but are wondering how does a reverse mortgage work? Here’s a closer look at the basics to help you know if a reverse mortgage is right for you.

There’s no doubt that reverse mortgage loans have become increasingly popular today. You may have seen the growing number of commercials by lenders promoting these home loans, but exactly what is a reverse mortgage?

What Is A Reverse Mortgage?

A reverse mortgage is a unique loan program available to seniors over 62 that lend you the equity in your home. But, unlike a regular home equity loan or line of credit, you do not make loan payments or pay back the loan until you move from your home, sell it outright, or pass away.

The reverse mortgage loan will never be a burden that is passed onto your heirs because the loan will automatically be paid off from the sale of your home.

The amount of money that is available to you with this type of loan is based upon the amount of equity in your home among other factors. Government regulations also cap the total amount that can be loaned to approximately $200,000. Fannie Mae offers a reverse mortgage loan program that increases this amount to $400,000.

How Does A Reverse Mortgage Work With Other Benefits?

Having a reverse mortgage will not affect your Social Security payments or your Medicare and other outside pension benefits. The only benefits that could possibly be affected would be Medicaid or SSDI, but in many cases this can be worked around in a way that you can still receive your benefits.

You first step in considering whether a reverse mortgage loan is right for you is to get all the facts. You can find everything online, as well as on our website. To help you better understand everything you need to know.

If you are needing to supplement your retirement income, a reverse mortgage loan may be an excellent option, but you should absolutely check everything out before signing any loan contract.

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3 Responses to “How Does a Reverse Mortgage Work?”

  1. Corey Matelli Says:
    October 3rd, 2007 at 9:48 am

    This was a very good article. Thanks for posting it. I just wanted to add one little detail which readers may find very interesting.

    You stated the following, which is absolutely true, The reverse mortgage loan will never be a burden that is passed onto your heirs because the loan will automatically be paid off from the sale of your home. It is also worth noting that in most cases, there is still retained equity even after paying off the reverse mortgage, meaning that the heirs will still receive an inheritance. Heirs also have the option, of course, to keep the home by securing their own financing which would pay off the reverse mortgage.

    Thank you for your great overview of reverse mortgages!

  2. Jonny Says:
    October 3rd, 2007 at 11:05 pm

    Hi!
    Thank you for your great overview of reverse mortgages!

  3. Chuck Helsel Says:
    October 5th, 2007 at 11:40 pm

    Again another great overview of Reverse Mortgages.

    Nice Comment by Corey about the potential of equity going to heirs after the sale of the property.

    I think when considering a reverse mortgage, a senior should consult their heirs before acting. If the heirs want to they can attend a Reverse Mortgage counseling course. The whole family will be on the same page. In fact, at application a Senior will ask to sign a Reverse Mortgage Advisor Disclosure form. It states the borrower sought advice from ” trusted advisor, such as attorney, accountant, banker, relative or friend” or chose not to seek advice.

    I see no reason for the senior not to get support from a number of people close to them before moving forward. An educated homeowner is a smart one.

    Chuck Helsel
    CalPacific Mortgage Consultants
    858-657-1054

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