What is a Reverse Mortgage?
Through a U.S. government insured program, originally created by AARP, a senior can obtain a loan for approximately 55%-75% of the appraised value of their home. The senior never has to repay the loan in their lifetime, as long as they live in the home. Then, when the last surviving spouse dies, the money received (plus interest and closing costs) is repaid by the estate, usually from the sale of the house.
Typically, seniors who do a reverse mortgage get $50,000 - $400,000 cash today and they always retain 100% ownership (and the future appreciation) in the home. Also note that there are no income or good credit requirements. A senior simply must be 62 or older and have equity in their home.
Already Have a Mortgage?
If you do, that's OK. You can still do a reverse mortgage. But with the proceeds, you must payoff the balance of your existing mortgage. By doing so, you then eliminate your monthly mortgage payment - thereby your monthly income goes up by that amount.
Amount You Can Receive
We loan you between 55%-75% of the appraised value of your home. The older you are, the more you get. Listed below is an approximation of the % of the value you would receive in cash (in the form of a loan) based on your age.
Age - % |
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65 - 57% |
70 - 60% |
75 - 63% |
80 - 66% |
If you already have a mortgage on your home: Subtract the amount of your existing mortgage to determine the net cash you would receive.
Also remember that going forward, you won't have a mortgage payment each month because your existing mortgage is paid off in the process of getting a reverse mortgage.
Use of Proceeds
The proceeds from a reverse mortgage can be used for anything: daily living expenses, home repairs and home improvements, medical bills and prescription, paying of existing debts, education, travel, long-term health care, etc. Many people use reverse mortgages as a way to give their kids a portion of their inheritance now, so they can see those happy faces while they are still alive. Many seniors feel comfortable doing this since there are no monthly mortgage payments associated with a reverse mortgage.
The proceeds from a reverse mortgage are available as a lump sum, fixed monthly payments or a line of credit.
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