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For those Retired and 62 or over, maybe a Reverse Mortgage would be of help.

A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live in your home. With a reverse mortgage, you can turn the value of your home into cash and not have to make monthly repayments. The total loan must be paid back when the last surviving borrower dies, sells the home, or permanently moves away.

Reverse mortgages are quite a bit different from other types of debt. These loans can be complicated, and you have a lot at stake. So be sure to investigate reverse mortgages carefully before deciding if one makes sense for you.

Eligibility

  • All homeowners must be age 62 or older and occupy the property as their principal residence, please see Loan Repayment

  • The home must be owned free and clear or only a small remaining balance exists. (The reverse mortgage may be used to pay off the balance on an existing loan)

  • The property must be a single-family or up to a four-unit dwelling

  • also eligible Condominiums and Town homes

How much can be borrowed?

The total maximum amount that can be borrowed is based on three factors:

  • The age of the youngest homeowner

  • The market value of the home

  • The current interest rate

Reverse Mortgage Payment Plan Options

There are different ways of receiving the loan proceeds. The homeowners choose an option that best fits their goals.

Term: Provides fixed cash advances for a set period of time.

Tenure: Provides fixed cash advances for as long as the homeowners occupy the property as their principal residence.

Line of Credit: Establishes a credit line which the borrower draws upon as he or she wishes.

Combination: Or a combination of the above options.

Fees & Cost: There are four basic types of charges involved in setting up a reverse mortgage, interest not include:

  • an origination fee

  • initial and monthly mortgage insurance premiums

  • other closing costs

  • a monthly servicing fee

Some of these fees are payable at closing and some are added monthly to the loan balance.  Typically, the only out of pocket expense for participation in the reverse mortgage program is $300 towards the cost of a home appraisal.

Interest Rate: Only adjustable interest rate loans are currently available.  The borrower does have the option of either a monthly adjusting rate or an annually adjusting rate.  Rates are linked to the one-year U.S. Treasury Security Rate.  The change in the interest rate has no effect on the amount or the number of loan advances that the borrower can receive but causes the loan balance to grow at faster or slower rate.

Loan Repayment: The loan is due and payable when the borrowers no longer occupy the property as their principal residence or fail to comply with the loan agreement.  The loan agreement states that the borrowers understand it is their responsibility to maintain the property and to pay the real estate taxes and hazard insurance premiums. 

The loan must be repaid in one payment - either from the sale of the home or through other resources.  There is no requirement that the property be sold, only that the loan is repaid.

Effect on Public Benefits: Loan proceeds are not considered income and will not affect Social Security, Medicare because these programs are not based on need. You need to check with the benefit specialist for that program.