Reverse Mortgages

A reverse mortgage is the opposite of a traditional mortgage. With a normal mortgage, you get a loan to buy a house and then make monthly payments against the loan. With a reverse mortgage, a lender makes payments to you based on the equity you have in your home, its value, and your age. The money can be paid in a lump sum, as a line of credit upon which you can draw whenever you need extra cash, or in monthly payments.

You must be at least 62 to be eligible for a reverse mortgage. If the house is jointly owned, all the owners must be 62 or older and must sign the reverse mortgage agreement. Single family one-unit dwellings are eligible for reverse mortgages and generally must be a principal residence, according to the American Association of Retired Persons.

The loan is due when the last living borrower moves permanently, sells the house, or dies. The loan, including all interest and other charges, typically is paid off by selling the house.

The title remains in the homeowner’s name until the property is sold to pay off the loan, so the borrowers are still responsible for paying property taxes and homeowners insurance and keeping up with needed repairs. If you default in any of these areas, the loan may become due.

Over time, your equity decreases and the amount of debt increases, although it can never exceed the value of your home, according to the National Reverse Mortgage Lenders Association. You can never owe more than your home’s value at the time the loan is repaid, so the lender can never go after your other assets or your heirs for more money than the home is worth. If the amount you owe is less than your home is worth when you pay back the loan, your heirs or your estate can keep what’s leftover.

If you have any questions, please call me at (801) 278-0292 ext. 117 or email me at janet_blood@stonebrook.com