How Does a Reverse Mortgage Work?

If you are over the age of 62 and have enough equity in your home, you may qualify for a Reverse Mortgage. However, many seniors are concerned about the ramifications of a reverse mortgage. The next few paragraphs will take a look at the different types of reverse mortgage loans available and how these types of reverse mortgages work.

Many Seniors are concerned with where a Reverse Mortgage will leave them equity-wise and how this could affect their heirs. A mortgage professional can print a detailed analysis of your equity position throughout the course of your reverse mortgage loan. You can then review this with your family, financial planner, and attorney to increase your level of comfort.

There are many different options available with reverse mortgage loans. One popular option is to pay off any liens currently on the property, make a one-time nominal withdrawal for debt consolidation and/or home repair, and then receive a payment each month thereafter. There are also programs where one can utilize a line of credit as well.

Yes you can have a current mortgage on your home and still get a reverse mortgage. The reverse mortgage will pay off your current mortgages. This way you can choose to never have another mortgage payment for the rest of your life. You can even have it set up so that all of your property taxes and insurance payments are no longer a concern. Contact a mortgage professional today to see if a reverse mortgage is right for you.

Here is a question that is frequently asked regarding Reverse Mortgages, "Do I pay taxes on the income from a reverse mortgage?" Currently, the Internal Revenue Service treats monies received from a reverse mortgage to be loan advances and not taxable income. For your specific situation, we recommend that you consult your tax adviser.

A common misconception about a reverse mortgage is that you no longer own the home and deed it over to the bank. When you obtain a reverse mortgage you still own your home. Remember, a reverse mortgage is merely a loan against the property just like any other loan. The title remains in the name of the borrower and the lender is only repaid the loan balance or the home value which ever is less.

What's nice about a reverse mortgage is it not only allows you to eliminate your mortgage payment but you also have options of receiving money in different ways based on your situation.
You can take a lump sum cash You can take a tenure payment (that's a set monthly payment for as long as you live in the home) Or you can take term payment (a set amount for a set time frame such as 1, 5, or 10 years)

A Reverse Mortgage borrower cannot be forced out of his home. Nor can he ever owe more than the value of his property. Reverse Mortgages are "non-recourse" loans, meaning in the rare cases of drastic declines in home values, the homeowner cannot be held personally liable beyond the value of the subject property.

» DISCLAIMER: The information contained in this article on 'How Does a Reverse Mortgage Work?' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.