Reverse Mortgage
A financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments, typically to supplement retirement income.
What is Reverse Mortgage?
A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash.The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds can be used.The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
Why Do You Need Reverse Mortgage?
Income
Senior citizens get income after retirement. Loan up to 60-90% of property value may be sanctioned.
Tenure
If you outlive the tenure of the loan, you continue to stay on the property. Ownership continues to remain with you.
No Tax
The amount you receive under reverse mortgage is a loan and not an income. You do not have to pay any tax on these amounts.
Emergency Money
Money can be used for medical and other emergency treatment. Useful as an income after retirement.
Borrower Requirements and Responsibilities:
Age Qualification
All borrowers listed on title must be 62 years old. If one spouse is under 62, it might be possible to get a reverse mortgage. However, the loan officer will need to collect additional information upfront to determine eligibility.
Primary lien
A reverse mortgage must be the primary lien on the home. Any existing mortgage must be paid off using the proceeds from the reverse mortgage.
Occupancy Requirements
The property used as collateral for the reverse mortgage must be the primary residence. Vacation homes and investor properties do not qualify.
Taxes and Insurance
Borrowers must remain current on real estate taxes, homeowners insurance, and other mandatory obligations, including condominium fees.
Property Condition
Borrowers are responsible for completing mandatory repairs and maintaining the condition of the property.