Reverse Mortgage – Get all the facts!
The Reverse Mortgage is a Government approved loan that allows seniors to Get equity from the home value in cash to pay extra expenses or travel and live in their home and not have to pay a payment. The accumulated equity derived from mortgage payments and appreciation can be paid to the borrower. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer uses the home as their principal residence.
Q. How do clients qualify for Reverse Mortgage?
A. Clients must be 62 or older and own a home with some equity. They don’t need any income to qualify. If your client currently has a mortgage, that’s okay — we can pay it off with a Reverse Mortgage. Clients can even have bad credit, as long as there are no current government liens against their home.
Q. How can our clients use the money?
A. The money from a Reverse Mortgage can be used for any purpose, from making ends meet to living retirement dreams. The top reasons for funds used given typically by borrowers are:
- Paying off debts, primarily mortgage and credit cards
- Home repairs and remodeling
- Living expenses
- Health care or long-term care
- Easing the financial burden on their children
Q. Will our clients lose their home?
A. Absolutely not. Our client remains the homeowner and he/she can stay in the home for as long as he/she desires. In effect, the borrower is being paid to live at home. The Reverse Mortgage program is regulated and insured by the Federal Housing Administration. By law, the homeowner can’t be forced to sell or move. And no payments are due on the Reverse Mortgage until our client no longer lives in the home.
Q. If no monthly payments are required, how is the Reverse Mortgage paid back?
A. This isn’t a home equity loan. The loan is paid back when our client moves out of the home, sells it or all the people on the title have passed away.
Q. What if our client wants to leave the home to the kids?
A. It’s their home. Your client can still leave it to their children or to anyone he/she chooses. The heirs can pay off the loan any number of ways, such as the following:
- Sell the house.
- Refinance the debt.
- Use other funds to pay off the Reverse Mortgage.
Q. How much cash can our clients get?
A. The Reverse Mortgage amount depends on our client’s age and the value of the home.
Q. What do the experts say about this program?
A. Many financial counselors, senior advocates and published reports suggest that a Reverse Mortgage can be a smart way to secure a financial future during retirement.
Q. Are there any costs?
A. As with any loan, there are closing and other costs, all of which can be paid with the money generated by the Reverse Mortgage but there are NO out-of-pocket costs to the homeowner.
Q. Will our client have to pay any taxes?
A. In general, the IRS does not consider proceeds from a Reverse Mortgage to be taxable income. Our client is still responsible for property taxes, homeowner’s insurance and for all home upkeep and maintenance. You must recommend that they consult a tax professional.
Q. Will this loan affect our client’s Social Security or Medicare benefits?
A. HECM payments do not affect Social Security or Medicare benefits because those benefits are not based on the assets of the recipient. However, in the federal Supplemental Security Income program, beneficiaries must keep their liquid resources under certain limits.
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