- What is a Reverse Mortgage?
- How does a Reverse Mortgage works?
- Alternatives to a Reverse Mortgage
- Reverse Mortgage Essentials
- What are some of the advantages of a Reverse Mortgage?
- Questions that need attention before considering a Reverse Mortgage
What is a Reverse Mortgage?
A Reverse Mortgage is a special designed home loan just for senior homeowners. If you qualify for a Reverse Mortgage, you will not have to make monthly payments on the loan. Instead, the lender pays you. Typically, the Reverse Mortgage is repaid from your home's equity when you sell the home, move out permanently, or die. You, or those who will inherit from you, can keep any sales proceeds from your home in excess of what you owe the lender.
Reverse mortgage is a loan against your home.
- You don't have to pay back for as long as you live there.
- You can turn the value of your home into cash without having to move or to repay the loan each month.
- No repayment for as long as you or any co-owner (s) live in the home.
- In reverse mortgage, you don't have to make monthly repayments. You don't even need a minimum amount of income to qualify for it.
Cash Options
A simple lump sum cash
- A regular monthly cash advance
- As a "credit line" account
- Combination of the above
Property owner may mortgage his/her residential property to MBSB in return for cash advance or monthly income payment. Maximum mortgage amount to MBSB is 60% of the market value (MV) of the property. Property is converted to debt at 60% and the owner is holding 40% equity.
Choosing the right Reverse Mortgage can give you greater financial independence and reassurance during your golden years. Choosing the wrong plan could lead to financial disaster.
How does a Reverse Mortgage works?
Reverse mortgage is similar to a "forward" mortgage - the kind you use to buy a home. Both types of mortgages create debt against your home but in opposite ways.
Reverse mortgage turns your home equity into three things:
- Loan advances paid to you.
- Loan costs paid to the lender and others.
- Leftover equity, if any, paid to you /heirs.
DEBT - EQUITY (D-E) RELATIONSHIP
D-E in Forward Mortgage:
- Debt decreases
- Equity increases
It's a "falling debt, rising equity" type of deal.
D-E in Reverse Mortgage:
- Debt increases
- Equity decreases
It's a "rising debt, falling equity" type of deal.
Alternatives to a Reverse Mortgage
Consider alternatives to a Reverse Mortgage if:
- You want to leave your home, free and clear, to your children or others who will inherit from you.
- You have another, less costly means to reach your financial goal. A Reverse Mortgage can be an expensive way to borrow money.
Reverse Mortgage Essentials
Two important things you should do before getting a Reverse Mortgage:
- Determine if you really need a Reverse Mortgage or if another type of loan would be better for you. Depending upon your needs and your financial situation, you may be able to meet your goals with another, less costly financial solution than that provided by a Reverse Mortgage.
- See a friendly Reverse Mortgage counselor-free of charge - to help you decide if a Reverse Mortgage is for you, or to help you choose among the different types of Reverse Mortgage.
What are some of the advantages of a Reverse Mortgage?
- A Reverse Mortgage can help you maintain your financial independence and an adequate standard of living.
- A Reverse Mortgage allows you to remain in your home and retain ownership.
- The money you receive from a Reverse Mortgage is tax-free.
Questions that need attention before considering a Reverse Mortgage
Use this list of shopping questions:
- How much money do I need?
- Is there a way to meet my needs that does not involve getting a Reverse Mortgage?
- Will a Reverse Mortgage make my partner or me ineligible for any government benefits, currently or in the future?
- Do I qualify for this Reverse Mortgage?
- How much can I borrow through a particular Reverse Mortgage product?
- How much will it cost me in fees and interest to borrow this money even if I don't have any "out of pocket" expenses?
- Will I have to sell my house before I die to pay off this Reverse Mortgage?
- What happens if I die, and my partner is still alive and living in the home;will he or she have to leave or pay the loan off?
- What happens if I have to go to a nursing home; will the loan become due and payable?
- What will I or my heirs have left after the loan is paid off?
- Are there any early-repayment penalties?
- What are my obligations under the Reverse Mortgage, such as home maintenance, property taxes and insurance?
