Many people aged sixty-two or older are "house-rich and cash-poor." They're free of house debt, but their income is limited. A reverse mortgage may allow some to take advantage of their house as an asset and convert it to income. Many people aged sixty-two or older are "house-rich and cash-poor." They're free of house debt, but their income is limited. A reverse mortgage may allow some to take advantage of their house as an asset and convert it to income.
A reverse mortgage is a loan where the lender pays you - either in a lump sum, a monthly advance, a line of credit or all three - while you continue to live in your home. To qualify, you must own your home and all owners of the home must be sixty-two years of age or older.
The amount you can borrow is generally based on your age, the home's value and the interest rate the lender is charging. Funds received can be used for any purpose.
Reverse mortgage loans typically require no repayment for as long as you live in your home. But they must be repaid in full, including all interest and other charges, when the last living borrower dies, sells the home or permanently moves away.
Reverse mortgages may have tax consequences, affect eligibility for assistance under federal and state programs and have an impact on the estate and heirs of the homeowner.
Getting money for daily living out of the home that's paid for may sound great, but it's important to understand what you are doing and how it affects your financial situation. If you consider reverse mortgage an option to explore, seek help for an unbiased opinion of the consequences both the pros and the cons. There are trained Home Equity Conversion Mortgage counselors (HECM) available to help. In Minnesota, many of them work for community action agencies.
Information on finding a reverse mortgage counselor is available through the Department of Housing and Urban Development (HUD) and AARP. Visit www.hecmresources.org/network.cfm to search the network of HECM counselors by state, or call AARP's toll-free number, (800) 209-8085, and ask for reverse mortgage counselors. The AARP line is staffed Monday through Friday, from 6:00 a.m. to 11:00 p.m. CT.