#1 Reverse Mortgage Lender.

Trusted lender for over 25 years.

About Reverse Mortgage Loans

Reverse mortgages are unlike traditional home loans that require borrowers to make regular monthly payments until the total amount owed is paid in full.With a reverse mortgage, the borrower is not required to make monthly principal and interest payments.Qualifications for traditional mortgage loans are largely based on a borrower’s ability to afford a home loan.While applicants are required to meet certain qualifications for a reverse mortgage, a borrower’s debt-to-income ratio and credit scores are not used to underwrite the loan.

However, a borrower may need to provide financial assets or proof of income to cover property taxes and homeowners insurance.Any liens that are secured against the property must be paid-in-full, and the borrower shall receive proceeds that remain, after various lender fees and third-party fees are paid.Applicants can apply for a reverse mortgage via private lending sources or for a Home Equity Conversion Mortgage through government-backed programs from the Federal Housing Administration.According to the U.S. Department of Housing and Urban Development, $822,375 is the loan limit for reverse mortgages in 2021.

About Reverse Mortgage Loans

Reverse mortgages are unlike traditional home loans that require borrowers to make regular monthly payments until the total amount owed is paid in full.

With a reverse mortgage, the borrower is not required to make monthly principal and interest payments.

Qualifications for traditional mortgage loans are largely based on a borrower’s ability to afford a home loan.

While applicants are required to meet certain qualifications for a reverse mortgage, a borrower’s debt-to-income ratio and credit scores are not used to underwrite the loan.

However, a borrower may need to provide financial assets or proof of income to cover property taxes and homeowners insurance.

Any liens that are secured against the property must be paid-in-full, and the borrower shall receive proceeds that remain, after various lender fees and third-party fees are paid.

Applicants can apply for a reverse mortgage via private lending sources or for a Home Equity Conversion Mortgage through government-backed programs from the Federal Housing Administration.

According to the U.S. Department of Housing and Urban Development, $822,375 is the loan limit for reverse mortgages in 2021.

Qualifying for a Reverse Mortgage Loan

Applicants for a reverse mortgage loan must be 62 years of age or older.

Using the equity from a borrower’s primary residence, the maximum amount for a reverse mortgage loan will typically equal about 60 percent of the appraised property value.

A specific loan-to-value threshold is not used to arrive at the loan amount. Although, a borrower’s age and the current mortgage interest rate is used toward determining the maximum loan size.

Are Reverse Mortgages Ideal for Seniors?

Marketing firms often promote the benefits of reverse mortgage loans for senior citizens.

There are a variety of benefits for seniors who are interested in obtaining a reverse mortgage.

However, there are some disadvantages that seniors should also understand before making a decision that jeopardizes a substantial amount of home equity.

Advantages of Obtaining a Reverse Mortgage Loan

 

For retirees who are seeking additional funds without the desire to downsize to a more affordable home, a reverse mortgage might provide a helpful lifeline.

How Will a Borrower Receive the Proceeds From a Reverse Mortgage Loan?

An eligible borrower can receive a lump-sum amount, a partial amount, a line of credit, receive monthly distributions or elect to receive a combination thereof.

Are the Distributions From a Reverse Mortgage Taxable?

No. 

Therefore, a senior who needs additional money without the added pressure of finding a job, which might impact certain retirement benefits would not be required to pay taxes on the proceeds from a reverse mortgage.

What Credit Score is Needed to Get Approved for a Reverse Mortgage?

Approval for a reverse mortgage is not based on a borrower’s credit history. Borrowers with really bad credit or low credit scores can qualify for a reverse mortgage loan. Late credit card payments, past-due medical bills, late auto payments or other late payments will not impact a borrower’s ability to obtain a reverse mortgage.

Disadvantages of Obtaining a Reverse Mortgage Loan

Converting home equity into cash might not be a great option for some seniors.

A reverse mortgage could quickly reduce a borrower’s net worth and decrease the amount of equity that is earmarked for heirs, such as children or other relatives.

Can a Borrower Buy Another Home After Getting a Reverse Mortgage?

A reverse mortgage may not be a wise idea if a borrower plans to move or to buy another home within a few years.Prior to moving or buying another home, the borrower must pay off the reverse mortgage or sell the home to pay off the total amount owed.

Borrowers can pay off a reverse mortgage loan without prepayment penalties.

If there is not enough equity to pay off a reverse mortgage balance, plus interest and other expenses, a lump-sum of money may be needed to satisfy the amount owed.

Will Heirs be Required to Sell the Property if the Borrower Dies?

Heirs to a property that is secured via a reverse mortgage will typically need to inform the lender of their plans within 30 days of the borrower’s death.

Thereafter, the heirs will need to pay off the loan, sell the home, obtain a loan to refinance the reverse mortgage or return the title to the lender.

Can a Foreclosure Occur With a Reverse Mortgage?

Yes!

Although, a borrower does not make monthly payments toward a reverse mortgage, a senior who gets too far behind on property taxes, homeowners insurance or homeowner association dues could risk losing their home via foreclosure.