What is a Reverse Mortgage?

A reverse mortgage is a special type of loan which enables you to tap into the equity in your home and receive cash, a tax-free monthly income and/or a line of credit. There are no monthly payments to make and the loan is not repaid until you permanently leave your home. Reverse mortgages are backed by the U.S. Government or major financial institutions.

How Do I Qualify for A Reverse Mortgage?

A reverse mortgage is easy to obtain, provided that:

  1. You are at least 62 years of age or older.
  2. Your home is,  or is to be,  occupied as your primary residence.
  3. You have substantial equity in your home (proceeds of the reverse mortgage can be used to pay off existing liens or mortgages).

Do I Still Own My Home?

Absolutely. You retain full ownership of your home when you obtain a reverse mortgage. As with any mortgage, the lender has a lien against your property. Since you make no monthly payments, the loan balance increases across time. When the loan is repaid the borrower or their heirs pay off the loan balance, which consists of the financed closing costs, the cash advanced from the reverse mortgage and the interest that has accrued. The remaining equity stays with the homeowner or their heirs.

What Can I Do With the Money?

You can use the money you receive from your reverse mortgage in any way you choose:

  • Supplement your income
  • Home improvements
  • Purchase of a new home
  • Pay off a current mortgage
  • Medical expenses
  • Pay off debt
  • Buy a new car
  • Travel
  • College tuition or gifts to family
  • The possibilities are endless ...

    How Do I Receive the Money?

    With a reverse mortgage, you have five payment plan options to choose from:

  • Tenure option: Receive equal monthly payments for as long as you occupy your home as your principal residence.
  • Line of Credit: Draw cash from your reverse mortgage whenever, and in whatever amount you choose, up to the available limit. Interest is only charged on the funds drawn from the line of credit.

    •  Lump Sum Cash Advance: You can receive all of your money in a lump sum upon the closing of your reverse mortgage.
    •  Modified Tenure: Set aside a portion of the loan proceeds as a line of credit, in addition to monthly payments.
    •  Term: Receive equal monthly payments for a fixed period of time that you select, for example 5 or 10 years.

    You can change payment plans as frequently as you wish for a very small fee.

    How Much Money Can I Receive?

    The amount of money you can receive from a reverse mortgage is determined by your home value, the age of the homeowner(s) and the current interest rate. Lisa will assist you in evaluating your options and calculate the maximum amount of money that will be available to you

    How is Interest Charged on a Reverse Mortgage?

    The interest on a reverse mortgage is adjustable and is tied to readily available market indexes. The initial rate is determined at loan closing and adjusts either monthly or annually. Interest charges do not affect the monthly payments that you receive and you are only charged interest on your loan balance, which consists of the cash you have received and the financed closing costs. Fixed rates are also available.

    What Costs are Involved with a Reverse Mortgage?

    As with a regular mortgage loan, there are closing costs involved with a reverse mortgage as well. These fees can be financed into the loan, and typically include the cost of the appraisal, title insurance, loan origination, escrow and recording fees.

    Lisa will provide you a good faith estimate of the costs involved.

    When Does the Reverse Mortgage Need to Be Repaid?

    The reverse mortgage becomes due and payable when the borrower permanently leaves the home; whether they move, sell or pass away. Reverse mortgages are typically repaid from the proceeds of the sale of the home, with any remaining equity staying with the homeowner or their heirs. If a spouse passes away, the surviving spouse continues to receive the full benefits of the reverse mortgage, with no repayment until they decide to permanently leave the home.

    Will My Heirs be held Responsible for Any of the Debt?

    No. Your heirs can not be held accountable for repaying the mortgage. Because the reverse mortgage is backed by the U.S. Government, you and your heirs are protected from ever owing more than what the house could be sold for any time in the future even if the property values depreciate.

    What is a Counseling Certificate?

    Before applying for a reverse mortgage you are required to meet with an independent reverse mortgage counselor. This counseling session will help you determine whether a reverse mortgage is right for you. The counseling session can be done either in person or on the telephone, and family or trusted friends are encouraged to participate. At the end of the meeting you will receive a Certificate of Borrower Counseling.

    For a list of counselors in your area, please call Lisa at (231) 218-0307.


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    Equal Housing Opportunity
    The Reverse Mortgage Center, Mortgage Broker, Traverse City, MI