What is a reverse mortgage?
A reverse mortgage is a loan that enables homeowners, age 62 and older, to convert a portion of their home equity into funds that are usually not taxed – without having to sell their home, give up title to it, or make monthly payments. A reverse mortgage only becomes due once your home is sold or estate is settled.
How much money will be available to me?
The total amount of reverse mortgage funds available depends on several factors including the age of the youngest homeowner, the type of reverse mortgage selected, current interest rates, your home's appraised value and the FHA Reverse lending limits.
How can I receive payments?
• Reverse mortgage funds are usually not taxed and can be tailored to fit your needs
• Receive the money as a lump sum payout
• Receive equal monthly payments for as long as the borrowers live in the home
• Receive equal monthly payments for a fixed period of time
• Set up a line of credit to obtain funds at any time until the line of credit is exhausted
• Combine options
What costs and fees are involved?
Closing costs can be paid directly out of the reverse mortgage proceeds, or you may choose to use your own funds to pay them at closing. The appraisal and credit report fees are collected at application. Counseling is required by the U.S. Department of Housing and Urban Development (HUD), and the counseling agency you select may charge a fee for this counseling. A Loan Tree Reverse Mortgage Specialist can review your situation with you and provide you with a summary of the costs and fees associated with your reverse mortgage.
What are the tax consequences of a reverse mortgage?
Reverse mortgage proceeds are not taxable because the Internal Revenue Service considers them to be loan advances. However, it's always wise to consult with your tax advisor regarding these matters.
Will a reverse mortgage affect my government benefits?
Having a reverse mortgage should not affect your Social Security or Medicare benefits. (Consult your Social Security, Medicare or other financial advisor regarding your particular situation). If, however, you receive SSI, Medicaid or other public assistance, your reverse mortgage loan advances are counted as "liquid assets" if kept in an account past the end of the calendar month in which you receive them.
You must be careful not to let your total liquid assets become greater than these programs allow. You should discuss the impact of a reverse mortgage on federal, state or local assistance programs with a professional advisor, such as your local Agency on Aging (toll-free at 1-800-677-1116) or a tax attorney.
What kind of homes are eligible for a reverse mortgage?
A reverse mortgage must be on the borrower's primary residence (where he or she lives most of the year). Eligible properties for The Loan Tree’s reverse mortgage include one-unit to four-unit homes, FHA-approved condominiums and planned unit developments. Mobile homes and cooperatives are generally not eligible for a reverse mortgage.
Will I continue to own my home?
Yes, your name will remain on the deed until your home is sold or your estate is settled. However, a lien will be placed on your property, as would be the case with any real estate secured loan.
