Reverse Mortgages
What is a reverse mortgage?
A reverse mortgage is a home loan (used for any purpose) where seniors, 62 and older, can access the equity (cash) built up in their home.
There are several different reverse mortgage programs. Fannie Mae Home Keeper®, Jumbo Cash-Out loan, and the HUD-insured Home Equity Conversion Mortgage (HECM) are three such programs. As demand increases, more reverse mortgage programs from different organizations will become available.
It is called a reverse mortgage because you borrow money from a lender, but the lender makes monthly payments to you, rather than you making monthly payments to the lender. All interest is paid at the end of the loan, rather than in the beginning.
What are some of the benefits of a reverse mortgage?
- Stop being "House Rich" and "Cash Poor".
- Help pay for health care, living expenses, travel with no mortgage payment.
- You can never lose your home in foreclosure as long as you maintain the property tax and insurance payments.
- The loan is only paid off when the house is sold by you or your heirs, or all borrowers move out of the house.
- Have extra income and still keep your Medicare or Social Security benefits.
- You can receive the cash in monthly amounts, lump sum, or draw from it only when needed. (or you can get cash now, and leave some for later use)
- The cash you receive from a Reverse Mortgage is NOT TAXABLE.
- No credit or income requirements are needed to get a Reverse Mortgage.
- Improve the quality of life in your golden years. (or buy a retirement home)
As the homeowner receives monthly cash income, the loan balance increases. In the following twelve-month example, the homeowner begins with a debt-free home. As money is received by the homeowner, the mortgage grows. By the end of month twelve, the homeowner owes the bank $6,000 plus $232.44 interest. All Reverse Mortgage loans are regulated by the government to prevent abuse by banks.
Assumptions*
| Regular monthly advances |
$500 |
| Annual interest rate |
7.0 % |
| Monthly interest rate |
.583% (.07 / 12) |
| 0 |
0 |
0.00 |
0.00 |
$500.00 |
| 1 |
$500.00 |
$2.92 |
$502.92 |
$500.00 |
| 2 |
$1,002.92 |
$5.85 |
$1,008.77 |
$500.00 |
| 3 |
$1,508.77 |
$8.80 |
$1,517.57 |
$500.00 |
| 4 |
$2,017.57 |
$11.77 |
$2,029.34 |
$500.00 |
| 5 |
$2,529.34 |
$14.75 |
$2,544.09 |
$500.00 |
| 6 |
$3,044.09 |
$17.76 |
$3,061.85 |
$500.00 |
| 7 |
$3,561.85 |
$20.78 |
$3,582.63 |
$500.00 |
| 8 |
$4,082.63 |
$23.82 |
$4,106.44 |
$500.00 |
| 9 |
$4,606.44 |
$26.87 |
$4,633.31 |
$500.00 |
| 10 |
$5,133.31 |
$29.94 |
$5,163.26 |
$500.00 |
| 11 |
$5,663.26 |
$33.04 |
$5,696.29 |
$500.00 |
| 12 |
$6,196.29 |
$36.15 |
$6,232.44 |
$500.00 |
*Many criteria are considered when determining the reverse mortgage loan amount, interest rate, etc.
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