Reverse Mortgages: Using Your Home Equity To Retire In Style

The reverse mortgage is a special type of home refinancing for a person age 62 or older. This is a way for a person to get money out of their home without having to make payments on the line of credit or lump sum they receive. With this type of program there is no payment or repayment of the loan and the money can be spread out in a single payment, used to create a fixed income for life, or used as a line of credit to be used as needed. These options can also be combined depending on the owner’s particular situation.

Down and out financially does not have to be your situation in life to use this type of loan. You may only want to pay off the balance on an existing loan and not have any more payments. Freeing up equity in your home can improve the quality of your life. The money can be used for vacations, paying medical bills, sending a grandchild to college, or simply supplementing retirement income. You’ve worked hard to build equity in your home, why not enjoy it now?

Unlike a conventional loan, there are no credit standards or income qualifications. The two most important factors are your age and the value of your home. The reverse mortgage process usually takes about 30 days before you can receive your money.

When you use this type of program, title to the property will remain in your name, you are not transferring ownership of the home. If at any time you choose to sell your home and move to another residence, you may do so. What goes to the bank would be the closing costs, the principal borrowed, and the interest on the loan calculated daily. The remaining equity in the house is all yours. Another frequently asked question is, are there negative tax consequences of using a reverse mortgage? The answer is that it is just like any other type of refinancing and is not taxable income.

When your heirs receive your house, they will have to refinance it, if they decide to keep it, or they will have to sell it. They will receive the remaining equity in the home, which would be the difference between the principal borrowed, accrued interest, closing costs, and commissions.

One of the safeguards that the federal government has put in place to make sure that the consumer understands exactly how this type of product works is the requirement that they participate in a HUD-approved counseling session. This can be done over the phone and there are several different agencies that can offer you this service for free. Once you have completed the counseling session, a certification will be mailed to you to validate that you have met the federal government’s requirements for independent third-party counseling.

In conclusion, if you want to use the equity in your home to more fully enjoy your golden years, finding out how much a reverse mortgage can benefit you is a fairly simple process. All you need to know is the approximate value of your home and its age and you’ll be able to browse all the different types of products with a range of options.