If you’re over 62 and are considering tapping into your home equity with a reverse mortgage, you may be wondering two things:
– What exactly do reverse mortgages entail?
– Can I still get one, considering that two of the nation’s largest banks are dropping them?
To answer the first question, a reverse mortgage is a twist on the way we usually think of mortgage loans. You don’t pay the bank, the bank pays you! This loan lets you convert a portion of the equity in your home into cash. You can choose from a lump sum payment or a periodic income stream. Even better, unlike a traditional home equity loan or second mortgage, repayment is not required until you no longer use the home as your principal residence. Instead, the amount you owe grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. The interest is not deductible on income tax returns until the loan is paid off. You retain title to your home, and continue to be responsible for property taxes, insurance, utilities, maintenance and other expenses.
Because repayment isn’t required until you move or sell your home, there is no traditional underwriting or income requirements. Reverse mortgages are popular and likely to become more so, since they can provide older Americans greater financial security to supplement other income and Social Security. Many seniors often use reverse mortgages to cover unexpected medical expenses or make home improvements.
And now for the second question; we are happy to report that many other lenders are stepping in to make these loans available. For more information, we suggest you read a recent article in the New York Times called Reverse Mortgages Here to Stay.