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Reverse Mortgages

Reverse Mortgages

 

A reverse mortgage or Home Equity Conversion Mortgage (HECM) is a unique financial tool designed for seniors 62 and older. You enjoy access to part of the equity in your home and the freedom and comfort of the home you’ve known for so many years. It’s your home, now you can put it to work for you.

What is a Reverse Mortgage

Reverse mortgage borrowers retain ownership and title to their home. It’s yours just as it was before, but now you can benefit from the equity that’s been building in your home for years. In addition, HECM (Home Equity Conversion Mortgage) reverse mortgage loans give you the peace of mind of a government guaranteed FHA-insured loan where you will never owe more than the home is worth. You can get a reverse mortgage on your primary residence and no repayment is due until the last borrower passes away or permanently leaves the home. Borrowers must keep the home in good condition, pay property taxes and keep homeowner’s insurance coverage to avoid the loan becoming due and payable

As a protection all those seeking a reverse mortgage are required to obtain counseling (from an independent HUD-approved third party counselor) prior to incurring any costs associated with the loan. While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Medi-Cal.

The Facts

  • A Reverse mortgage is a specialized loan for seniors 62 and older
  • A reverse mortgage allows seniors to access a portion of the equity in their home.
  • Borrowers maintain title and ownership of their home.
  • Proceeds from a reverse mortgage are not subject to personal income taxation, but borrowers should seek tax advice on how proceeds may effect government needs-based programs such as Medicaid and Medi-Cal.
  • It is not a government grant, but a loan that is repaid in the future when the last borrower dies or permanently leaves their residence
  • A reverse mortgage is eligible only for the borrower’s primary or principle residence
  • HUD counseling (from an independent HUD-approved third party counselor) is required prior to the borrower incurring any costs associated with the loan

* Borrowers should seek professional tax advice regarding reverse mortgage proceeds.

Reverse Mortgage Uses

The proceeds from a reverse mortgage can be used for almost anything:

  • Pay for medical costs.
  • Pay off existing mortgage (required as part of loan).
  • Pay credit card or other bills.
  • Home repair and improvement.
  • Property taxes and home insurance.
  • Increase monthly cash flow.
  • Travel.
  • Gifts.

 

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