Reverse mortgages, like any other tool, can be very
useful if you know how to use them. There are big differences from regular
mortgages, and you need to know those differences to make the right choices.
Let’s start with what is the same. A reverse mortgage
is still a mortgage. A mortgage is what gives your lender the right to take
your property in foreclosure if you don’t pay back a loan in accordance with
your promissory note. The promissory note creates the debt. The mortgage connects
the debt to your property. That part is the same with a reverse mortgage. You
sign a promissory note, which creates a debt. Then you sign a mortgage, which
ties the debt to your property.
Next we’ll look at the differences that make reverse
mortgages such a powerful financial tool.
Your credit score doesn’t matter. It doesn’t matter
how good or bad your credit score is. The primary factor is your age. The youngest person on the deed to your house
must be at least 62 years old. If that’s true, you are eligible. The only other
tests for eligibility are whether or not you are delinquent on any kind of
Federal government debt (income tax, for example) and whether or not you can
afford to pay your real estate taxes and other home-related expenses.
Most property types qualify. If you live in a
one to four family house, your property qualifies. Most condominiums and certain
“manufactured” homes will qualify too, but co-op apartments and mixed-use
buildings will not. Those restrictions come from the Federal government (HUD and
FHA), not from the banks.
No payments during your lifetime. Now here is the
fun part: you don’t have to pay the money back as long as you live in your
house. Typically the money is paid back by your estate after your passing.
Flexibility. Reverse mortgages
are very flexible. You can use the money for anything whatsoever. (You do have
to pay off any existing mortgage as part of your closing, however). You can
take the money in an up-front sump sum, or in the form of monthly payments from
the bank to you. You can even take a reverse mortgage as a line of credit, just
like a conventional home-equity line of credit (HELOC). Unlike a HELOC,
however, any money you take does not have to be paid back until you are no
longer in the home.
Most people want to know up front how much of their
home equity they can tap through a reverse mortgage. The answer depends on your
age (the higher the age, the higher the percentage of home value you can get),
on the value of your property, and on what current interest rates are doing.
The government has set a maximum reverse mortgage amount of $625,000 as of this
writing. There are many reverse mortgage calculators online that will tell you
how much you can qualify for. You plug in your age, home value and address, and
the amount will be calculated for you. One that I like can be found at www.bitly.com/MorCalc.
Despite all the
advantages for senior homeowners, reverse mortgages are not the right financial
tool for all situations. For that reason, the government requires you to speak
to a HUD-certified counselor before you proceed. As always, get independent
legal advice before signing any papers that affect your money or your property.
Call, visit or click for more information:
Levy & Nau P.C. / attorneys at law
844-LEVY-LAW or
718-622-8150
854 Fulton Street,
Brooklyn NY 11238
www.LevyNau.com
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