Reverse Mortgage is a loan made by a bank and insured by FHA that allows folks over the age of 62 to borrow approximately 45-70% of the appraised value of their home. The older the youngest spouse the more money will be available to the homeowners. If there is a mortgage on the home now, the homeowners will have to have enough equity in the home to pay off the current mortgage. There are no monthly payments toward principle or interest in the loan, which make the Reverse Mortgage so attractive.
The homeowners retain 100% ownership in the home, and their only obligations are to pay the property taxes and homeowner’s insurance each year, and because they own the home they will continue to maintain the property.
The homeowners are guaranteed to live in their home as long as they can and want to. If a spouse should die, the surviving spouse can continue to live in the home as long as he or she desires. When the last spouse leaves the home for whatever reason, the loan is to be repaid, usually by selling the house. The proceeds from the sale will automatically repay the Reverse Mortgage, and if there is any money left it goes to the homeowner or their estate. There would never be a situation where the homeowner or their family members would be asked to pay anything extra…this is guaranteed.
Money borrowed from the proceeds of a Reverse Mortgage can be paid to the homeowner in monthly payments, a partial lump sum with a line of credit for the balance of available funds, or a combination of the two. Because the funds are borrowed there is no income tax to pay, and the funds borrowed do not affect Social Security or Medicare payments.
So in conclusion, homeowners are able to borrow some of their equity money in their home to make their retirement easier with dignity, they have no monthly payments toward principle or interest, and they can live in their home for as long as they wish.