What Is A Reverse Mortgage?

Article submitted by Bob Nonnemaker. He is a FHA HUD approved Reverse Mortgage Specialist with Financial Freedom Senior Funding and can be reached at 480-539-3309.

A reverse mortgage is a government insured loan available to homeowners who are 62 and older . This unique and increasingly popular loan enables senior homeowners to convert their home equity into income without having to sell the home, give up title or take on new monthly mortgage payments. Funds obtained from the reverse mortgage are tax free. Borrowers can choose to receive the funds as a lump sum, monthly income or line of credit, or any combination of the three. The funds can be used at any time for any reason.

Commonly Asked Questions

Q. Can a reverse mortgage be taken out if there is already a mortgage on the home?

A. Absolutely! Proceeds from the reverse mortgage would be used to pay off the existing mortgage and any extra funds would be given to you. The reverse mortgage will eliminate your monthly mortgage payment!

Q. Will I have any tax liability from the reverse mortgage proceeds?

A. NO. The IRS treats monies received from a reverse mortgage as loan advances, not taxable income.

Q. Will the monies from a reverse mortgage affect my Social Security or Medicare?

A. No. The proceeds from a reverse mortgage do Not affect these benefits.

Q. Does the lender take my home when I die?

A. Absolutely Not! A reverse mortgage is simply a loan against the property.

The title remains in your name and the lender is only repaid the loan balance.

Q. When does the loan become due and payable?

A. The loan becomes due and payable when the borrower sells the home, permanently leaves the home or passes away. Until one of these events takes place, you live in the home and make No payments to the lender.

Q. What is due when the loan is repaid?

A. The borrower or their heirs pay back the cash advances that were received plus accumulated interest and any fees that were financed into the loan.

Q. What if I owe more than the home is worth?

A. All reverse mortgages are non-recourse loans, which means the FHA guarantees that the borrower can never owe more than the value of the home. No debt can ever be passed on to your children or heirs.

Q. How is a reverse mortgage different than a home equity loan?

A. First, there are No payments with a reverse mortgage and secondly, there are NO income or credit qualifications to obtain a reverse mortgage.