Supplement your retirement with funds that are usually not taxed and require no monthly payments. If you’re a homeowner, 62 or older, find out how a reverse mortgage from The Loan Tree may be right for you.
Convert part of your home’s equity to cash with a Reverse Mortgage
Reverse mortgages allow homeowners age 62 and older to convert some of their home’s equity into cash – without having to worry about making monthly payments. You’ll still own your home, and the bank will be repaid later, once your home is sold or your estate is settled. Read on to learn more about this unique loan type, and visit our frequently asked questions for even more helpful information.
Benefits of a Reverse Mortgage
A reverse mortgage could be an ideal way for you to benefit from the real estate investment you’ve made. A reverse mortgage can provide a new source of cash – that is usually not taxed – for life’s necessities or to help with retirement. An Improved Quality of Life, Financial Independence and Keeping your House. Remain in your home with no mortgage payments.
A reverse mortgage enables you, as a homeowner 62 years of age or older, to tap into what’s yours and use your home’s equity to obtain cash without a monthly payment. With a reverse mortgage, you will retain the full title to your home and, most often, the reverse mortgage funds can enable you to stay in your home. As part of this program, the homeowner must continue to occupy the home as their primary residence and keep it in good repair, with all taxes and insurance premiums kept up to date, subject to the terms of the mortgage.
Funding & Payments
Your available funds depend on several factors including the youngest homeowner’s age, type of reverse mortgage, interest rates, the FHA reverse lending limit and any real estate liens on the property.
Payments can be received in a variety of ways, allowing you to tailor a payout plan to meet your needs. You can receive funds that are usually not taxed in the form of a lump sum, a monthly check, a line of credit or any combination of these options.
Using the Proceeds
There are virtually no restrictions on how you can use your reverse mortgage proceeds – other than having to pay off any existing liens on your property (a prior mortgage, home equity loan, tax lien, etc.).
Here are a few of the more common ways people use their funds. Be sure to consult your financial and tax advisor(s) regarding your particular situation.
- Consolidate debt. After paying off any real estate secured loans (mortgages, home equity loans, etc.) if they are present, you may consolidate other debts such as car loans, credit cards and any other unsecured debts
- Cash for daily living. Use your additional funds for things like utility and medical bills, landscaping or snow removal services, home repairs, travel or an emergency fund
- Medical expenses. Including insurance deductibles, co-payments, in-home caregivers, physical rehabilitation or medical equipment
- Prescription drug costs. A reverse mortgage can help you obtain extra cash for prescriptions
- Home improvements. Such as siding, a new roof, deck, patio, landscaping, an addition, energy efficient windows and more
- Aging in place. As unique challenges arise, a reverse mortgage can help you make significant home improvements, such as curbless showers, handrails and grab bars, main floor laundry room, elevated toilets, lower kitchen cabinets, stepless entryways, wider door/hallways and stair/chairlifts
- Purchasing a new home. Purchase a new primary residence without qualifying for a traditional mortgage or making monthly payments – you need your own funds or investments to cover the difference between the price of your new home and the reverse mortgage proceeds
- Wealth management. Leveraging the equity in your home can potentially reduce your total estate value subject to taxation (consult your tax advisor). You can use your reverse mortgage proceeds to help in estate planning, early gift inheritance, supplemental income due to loss of a spouse, enhancing your total financial plan or reducing the draws needed to be taken from an investment portfolio during a market downturn
Costs, Taxes & Repayment
Closing costs can be paid out of the loan proceeds or with your own funds at closing. However, appraisal, credit report and counseling fees may apply during the application process.
Reverse mortgage proceeds are typically considered loan advances and are not taxable. Similarly, your Social Security or Medicare benefits should not be affected. If you receive SSI, Medicaid or other public assistance, your loan advances are typically 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. Consult your tax advisor.
The loan is repaid when the home is sold or the estate is settled. The repayment amount of a reverse mortgage cannot exceed the home’s value. In the event the home sells for less than the loan amount, your heirs are not responsible for the balance.
What to Know Before You Borrow
When you are evaluating your reverse mortgage options, there’s always the chance a disreputable reverse mortgage lender could take advantage of a borrower. You and your loved ones should:
Look out for scams
Be leery of any person attempting to sell an annuity using reverse mortgage proceeds or suggesting a younger spouse, under age 62, be removed from the title of the home in order to qualify.
Work with a reputable lender
The Loan Tree is celebrating its 30th anniversary and maintains an A+ rating with the Better Business Bureau. We also insure our Reverse Mortgage Specialists receive comprehensive reverse mortgage training.
Take advantage of the process
Reverse mortgage counseling is required prior to applying and is provided by a HUD-approved counseling agency. This simple step can be completed over the telephone and is another opportunity to ensure everyone understands how a reverse mortgage works. Some counseling agencies may charge a fee for this service. Involve trusted advisors in your decision.
Family, friends and professional advisors can provide outside counsel if you are unsure whether a reverse mortgage makes sense. The lender selected should welcome the participation of family or trusted friends in the process, if that’s what you wish, and encourage everyone to ask as many questions as possible.
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.
How to Request More Information
Why not call or email us for additional information at 732-988-5000 202 or email@example.com. Or you can click here and we will respond to your Reverse Mortgage request as soon as possible.
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Saturdays by appointment