Reverse Mortgage: Mortgage-Free Living in Exchange for Home Equity
A reverse mortgage is a unique financing option that provides senior clients the opportunity to convert their home equity into cash, while continuing to live mortgage-free in their homes. Like any financial agreement, reverse mortgages are not right for every client. The Global Mortgage professional financing team will help you understand reverse mortgage basics, benefits, uses and more. We can help you evaluate whether this or another financing option will best help you achieve your goals. If you live in Rancho Cucamonga, Upland, Ontario, Fontana, or surrounding California, contact us to schedule a reverse mortgage consultation.
Reverse Mortgage Basics and Benefits
A reverse mortgage is so-called because it is in many ways the opposite of a traditional mortgage. While you pay into a traditional mortgage to build equity, a reverse mortgage allows you to exchange the equity in your home for cash or credit. You can choose to receive this loan as a lump sum payout, monthly payments, a line of credit or a combination of these options. Reverse mortgage clients continue to live in their homes for as long as the reverse mortgage exists or until death, without making mortgage payments. Once the borrower dies, his or her heirs retain the choice to pay off the loan and keep the home, or the home will be sold to settle the remaining debt.
HECM vs Proprietary Reverse Mortgage
All types of reverse mortgage are funded through private mortgage lenders, like Global Mortgage. There is a distinction, however, between two main types of reverse mortgage. Proprietary reverse mortgages are insured through the private mortgage companies that provide these loans. Home equity conversion mortgage (HECM) is a government-insured loan. HECM loans are subject to more regulation through the federal government (the U.S. Department of Housing and Urban Development) than proprietary reverse mortgages. Most reverse mortgages in the U.S. are HECM loans. Proprietary reverse mortgages are also known as jumbo loans because they exceed the amount insurable through HECM ($625,500).
Reverse Mortgage Eligibility
Once we have determined whether your home qualifies for a government-insured HECM loan or a privately insured proprietary reverse mortgage, we can move through the loan approval process. If you seek an HECM, there are a few qualifications that must be met. They include:
- The borrower or youngest of two borrowers in a couple must be at least 62 years old.
- The borrower(s) must show the financial ability to continue to pay for homeowner’s expenses other than mortgage payments. These include: homeowner’s insurance, property taxes and general upkeep costs.
- The borrower(s) must participate in an informational session with a federally approved HECM counselor. The counselor will ensure that seniors are not being coerced into HECM and are fully aware of the requirements and terms of the loan.
- The borrower(s) must have full equity in their homes or be able to pay the remainder of their existing mortgage at closing of their HECM.
- The borrower(s) must agree to continue to live in his or her home for the entirety of the loan contract or until death. Seniors who choose to move out of their homes or end their contracts will be held liable for the remainder of the loan.
The Possibilities are Endless
Reverse mortgage is not right for everyone, but for some senior citizens, it holds a world of possibility. This unique loan option allows borrowers financial flexibility for all sorts of reasons. Many of our seniors would like to pay off existing other loans, while some supplement their existing social security or other income with monthly payments. Other clients use reverse mortgage as a line of credit for rainy day funds or home improvements. A Global Mortgage professional can help you gain a better understanding of this loan and determine if it makes sense for your lifestyle. If you live in Rancho Cucamonga, Upland, Ontario, Fontana, or surrounding California communities, contact us to schedule a consultation about reverse mortgage loans today.