Due to new legislation passed in 2013 reverse mortgages are back and better than ever. Did you know that reverse mortgages are federally insured by Fannie Mae and they no longer require signing over the title to the property in exchange for the loan? This is a major change in favor of the borrower.
What is a Reverse Mortgage?
A reverse mortgage is a loan to an individual/couple with significant equity in their home. The loan is essentially against the equity. In order to qualify there are terms and conditions which much be met:
– Home owner must be at least 62 years old
– For those age 62-79 the home owner can borrow up to 62% of the home’s current market value
– Those 80+ can borrow up to 72% of the home’s current market value
Here is How it Works:
– A portion of the available equity is put into a mutually agreed upon loan
– Funds can be withdrawn by the homeowner monthly or as a lump sum, or both
– Funds can be used for whatever expenses the home owner wants – including buying a second home, making improvements to the current home etc.
– No repayment is due until the death of the home owner
The most significant change is that the homeowner can never owe more than the home is worth. This creates a much less risky situation for the homeowner and their family. However, because there are more upfront fees than an equity line of credit, it is ideal for those homeowners who plan to stay in the home for a long period of time.
A reverse mortgage is perfect for homeowners who are looking for a way to stay in their home versus moving to a retirement community. Part of the money from the reverse mortgage can be used to adapt the home to better suit a senior’s needs so they can be quite comfortable “aging in place.” This can include installing stair climbers, handrails in the bath and a seat in the shower etc. Aging in Place is a growing trend since one can maintain their independence, enjoy a good quality of life, and much less expensive than assisted living facilities.
Here are some resources for further exploring if a reverse mortgage is right for you or someone you know:
- AARP – http://www.aarp.org/revmort
- National Reverse Mortgage Lenders Association – http://www.reversemortgage.org/