Basics of a Reverse Mortgage
A Reverse Mortgage (also called an HECM – Home Equity Conversion Mortgage) is an excellent mortgage program that allows borrowers age 62 years and older to withdraw equity on their home.
Senior homeowners who do not have a mortgage or have paid down a considerable amount of their loan and are currently living in their home may qualify for a reverse mortgage. HECM loan payments are deferred as long as the property remains the borrower’s primary residence. This type of mortgage received its name due to the fact that the cash flow is reversed – instead of making monthly payments to a financial institution, the financial institution pays you. When you sell your home or no longer use it as your primary residence, you or your estate must repay the loan plus interest and other finance charges to the lender.
Reverse Mortgage Benefits
There are different loan programs (fixed or adjustable) and the loan proceeds are nontaxable and do not interfere with Social Security benefits or Medicare benefits. You have the option of receiving your loan proceeds in a lump sum, receiving monthly payments or receiving a line of credit. This type of loan is advantageous to senior homeowners for a number of reasons. In our experience as mortgage lenders, the top reasons seniors decide that a reverse mortgage will be to their benefit are:
- Pay-off mortgage (20%)
- Home repairs / Maintenance (18%)
- Travel / Everyday luxuries (14%)
- Everyday expenses (10%)
- Unexpected emergency (9%)
- Address non-mortgage debts (7%)
- Health or disability (5%)
- Property taxes / Insurance (5%)
- Financial assistance of family members (2%)
- Investments (1%)
Every borrower is unique. If you are interested in learning how a reverse mortgage loan with Summit Mortgage can allow your home’s equity to work for you, please contact us today.