Reverse Mortgages
A Reverse Mortgage is a type of home equity loan
that allows you to convert some of the equity in your home into cash
while you retain home ownership. A Reverse Mortgage works much like
traditional mortgages, only in reverse. Instead of making a monthly
payment to your lender, the lender pays you. You do not make any
payments on your reverse equity loan when you are in it. Funds obtained
from a Reverse Mortgage may be used for any purpose such as home
improvement, vacation, a new car, or savings.
To qualify for an Reverse Mortgage, you must own
your home. The Reverse Mortgage funds may be paid to you in a lump sum,
in monthly advances, through a line-of-credit, or in a combination of
the three, depending on the type of Reverse Mortgage and the lender.
The amount you are eligible to borrow generally is based on your age,
the equity in your home, and the interest rate you qualify for.
Because you retain title to your home with a
Reverse Mortgage, you also remain responsible for taxes, repairs, and
maintenance. Depending on the plan you select, your Reverse Mortgage
becomes due with interest either when you permanently move, sell your
home, die, or reach the end of the pre-selected loan term. The lender
does not take title to your home when you die, but your heirs must pay
off the loan. The debt is usually repaid by refinancing the loan into a
forward mortgage (if the heirs are eligible) or by using the proceeds
from the sale of your home.
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You choose one of the following payments
each month:
- No payments are required as long as you
live in your home.
- Income received from your Reverse
Mortgage is usually tax-exempt (consult your tax advisor) and does not
affect regular Social Security or Medicare benefits, but may affect
eligibility for other types of government assistance.
- You retain ownership of your home.
- You can use the proceeds to pay off an
existing mortgage and eliminate your monthly mortgage payments.
- Reverse Mortgages provide you with a
source of income that can be used to improve your standard of living
and maintain your independence.
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- You must be at least 62 years of age and
live in the home as your primary residence. In the case of co-owners,
all co-owners must be at least 62 years of age.
- You must own the home; any existing
mortgage must be paid off with proceeds from the Reverse Mortgage.
- You must attend pre-application Reverse
Mortgage Counseling.
- There are no income, employment or credit
qualifying restrictions.
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