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About Reverse Mortgage

Shamrock Financial gives you some of the knowledge you need to make a decision if a reverse mortgage is right for you.

First, what a reverse mortgage is NOT:

• A reverse mortgage is not “a way for the bank to get your house”
• It is not a traditional home equity loan
• It is not based on income or credit levels
• It is not available to homeowners under the age of 62
• It is not free money
• It is not a cure-all
• It is not a decision to be taken lightly

A Reverse Mortgage is a wonderful tool for homeowners 62 years of age and older to obtain cash from the equity in their home.  The homeowner continues to live in the house while using the money in virtually any way he or she chooses. 

Here is how the process generally works:

There are only a very few requirements for eligibility after the decision has been made to get a reverse mortgage.  The borrower must own and live in the home as a primary residence and be 62 years of age or older.  In addition, the home itself must be of a type that qualifies for the reverse mortgage program.  The vast majority of single family homes qualify, as do most condominiums, town homes, 2-4 unit owner-occupied dwellings and manufactured homes, your income and credit levels do NOT matter.

There are a number of options for how to "structure" the money received.

1. Receive a one time lump sum.
2. Receive the money monthly.
3. Receive a credit line that provides flexibility.
4. Use a combination of the above methods.

Once you receive the money, there are virtually no restrictions on the way in which it can be used.  You CAN:

• Repay existing debt, including the existing mortgage (must pay existing debt)
• Make Home Improvements
• Finance Regular Living Expenses
• Ease Healthcare Costs
• Take a Trip to Somewhere You’ve Always Wanted to Go
• Give Gifts to Your Family and Friends

You should also know that you cannot lose your home at any time during the life of the loan for failure to make payments.  THERE ARE NO PAYMENTS TO MAKE.  The loan does not come due until you permanently leave the home or the last borrower dies.  The home must be kept up to reasonable standards, it must be insured, and the property taxes must be paid. 

Default risk is one of the ways in which a reverse mortgage differs from a traditional mortgage or home equity loan.  With those traditional products there is a risk of default and therefore a chance you could lose your home.  On the other hand, there are no payments to make with a reverse mortgage.  Therefore, as long as the property is kept to a reasonable standard, you will always have somewhere to live.

In addition, you can never owe more than the value of your home.  Even if you have been paid more than your home is worth, you can only owe the value of your home.  When the loan comes due, you or your heirs can either pay off the loan with existing funds or sell the house in order to satisfy the loan.  Excess proceeds from the sale go to your or your estate.