Reverse mortgages have a bad rap - consumers who have seen TV ads for reverse mortgages have a number of misconceptions about what the loans are and how they work.
The truth is, while a Reverse Mortgage isn’t suitable for everyone, for others, it is ideal. It will eliminate monthly mortgage payments, freeing up that money for other expenses.
Reverse mortgages are loans available to homeowners age 62 and older. These loans allow you to borrow money based on the value of your home. Unlike other kinds of loans, you don't have to pay back the debt immediately. The payments are deferred until you move out of the home or pass away -- in which case the balance due will be taken from your estate or sale of the home.
Whatever is left remains in your estate for your heirs. If the loan is more than the property is worth, the lender takes the loss.
A reverse mortgage is a type of home equity loan for adults 62 and older, designed to help you be more financially stable in retirement. The amount of money available to a borrower is determined by the home's value, how much the borrower still owes on the mortgage and the borrower's age.
The older a borrower is, the more money he or she will be able to draw through the loan. The loan amount is calculated based on the age of the youngest spouse living in the home.
You can choose to receive your payment as a lump sum, a monthly payment or a line of credit.
You won't have to make any payments as long as you -- or your spouse -- still live in the home. However, if you move out of the home or pass away, that payment becomes due.
If you or your heirs sell the home, the proceeds of the sale first go toward paying off the loan. If the home is worth less than is owed on the loan, all money from the sale goes to the loan, and it's considered paid.
New rules for reverse mortgages that took effect in 2014 better protect nonborrowing spouses and allow them to stay in the home.
How much you can borrow has nothing to do with your income and everything to do with the amount of equity in your home and your age.
Call 310-429-8070 for an evaluation of your situation. We can tell how much you are eligible to borrow.