What is a reverse mortgage? A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage ownership can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use(s) the home as their principal residence. A reverse mortgage is also known as an HECM – Home Equity Conversion Mortgage.
Who Qualifies for a reverse mortgage? All owners of a property must be at least 62 years of age and must occupy the home as their principal residence in order to qualify for a reverse mortgage. There are no income, employment or credit qualifying restrictions (no minimum credit score). Generally, a person age 62 would need about 50% equity in their home to qualify for a reverse mortgage. As a person’s age goes up, the amount of required equity goes down. Any existing liens will need to be paid (with the proceeds of the reverse mortgage loan) before the borrower can see any of the equity for themselves.
Are there differences options in reverse mortgages? There are a few different options in Reverse Mortgages. Using the different options can create different types of cash flow. According to Joe Condi, an accountant from Penacook, NH, cash flows generated by reverse mortgages are not considered income and therefore are not taxable and do not affect Social Security or Medicare. Joe recommends that when deciding if a reverse mortgage is the right option for you to consult with a reverse mortgage specialist, like Linda Rousseau from Bookend LendingMortgage Company as well as a tax advisor.
There is NO penalty for early payoff and there are no restrictions on use of funds.
Check out this website for more information on reverse mortgages: www.reversemortgage.org