Comprehensive Reverse Mortgage Guide
By
Harry Jensen,
Trusted Mortgage Expert with 45+ Years of ExperienceOur reverse mortgage guide was created by Harry Jensen, a mortgage expert with almost five decades of industry experience, including successfully navigating many borrowers through the reverse mortgage process while advising countless others against getting one. Having been in the industry for so long, needless to say he has a few gray hairs and he put his years of knowledge and expertise into developing this comprehensive and objective guide. Plus, our reverse mortgage guide is available for no cost to make sure that everyone can access the valuable information it provides.
A reverse mortgage can be difficult to understand, offers distinct risks and is certainly different than a regular forward mortgage that most people are familiar with. It is important that you have as much information as possible so you can make an educated decision if a reverse mortgage is right for you.
With over 25 pages of valuable information, insights and advice, our reverse mortgage guide walks you through the process from start to finish. The guide provides an in-depth and balanced perspective so you can understand both the advantages and disadvantage of a reverse mortgage. Perhaps most important, our guide reveals what lenders do not want you to know about reverse mortgages. Key topics covered by the guide include:
- How a Reverse Mortgage Works. Understand program eligibility guidelines including the borrower age requirement, how much money you can borrow, use of proceeds and program fees. Learn the mechanics of a reverse mortgage including how you have no monthly payment but your loan balance increases over time.
- Reverse Mortgage Positives and Negatives. Review an honest assessment of the benefits and risks of a reverse mortgage including a case study that shows the downside scenario when you lose nearly all the equity in your home. It is critical that you understand the both the good and the potential bad of a reverse mortgage.
- Key Terminology. Because it is so different than a regular mortgage, a reverse mortgage uses unique terminology that can sounds like a foreign language to some people. Our guide provides a glossary of key reverse mortgage terms to help you understand everything.
- Reverse Mortgage Program Options. There are different types of reverse mortgage programs including fixed rate and adjustable rate as well as multiple disbursement options for how you receive your loan proceeds. We break down your alternatives to help you decide what works best for your situation.
- Jumbo Reverse Mortgage Programs. Most reverse mortgages are subject to loan limits that cap how much money you can borrow. A small number of lenders in selected states allow you to take out larger, or jumbo, loans. This program is applicable to borrowers with higher property values who want to access more of the equity in their home.
- Common Reverse Mortgage Misconceptions. There are a lot of misunderstandings about reverse mortgages. Our guide examines and resolves the most common reverse mortgage misconceptions to clear up the confusion.
- Tips for Saving Money on a Reverse Mortgage. If you decide to move forward with a reverse mortgage, why not save as much money when you do it? Reverse mortgage closing fees are relatively high plus you pay interest on interest so your costs really add up over time. Our guide offers helpful pointers on how to lower your costs and save money on your loan.
As outlined above, our guide explains everything there is to know about a reverse mortgage. While a reverse mortgage is certainly not for everyone, depending on your individual circumstances it may help improve your cash flow and better manage finances. The most important thing is that you fully understand how the program works and especially the potential risks. Use our guide to become a more informed borrower and help you decide if a reverse mortgage makes financial sense for you. Simply fill-out the form below to download this highly informative guide.
Top Reverse Mortgage Benefits
1
Eliminate Your Mortgage Payment
A reverse mortgage enables you to pay off your existing mortgage and eliminate your monthly mortgage payment. Instead of making a monthly payment, the interest on your reverse mortgage is added to your mortgage balance. So your loan balance increases over time but you never make a monthly payment on your reverse mortgage which is a significant financial benefit for borrowers.
2
Improve Cash Flow
By eliminating your mortgage payment and potentially using your loan proceeds to pay off other debt, a reverse mortgage can significantly improve your monthly cash flow. Your mortgage payment is typically one of your largest monthly expenses so cutting that out and reducing other debt can boost your cash flow by thousands of dollars.
3
Financial Freedom
A reverse mortgage can provide financial relief for borrowers who are struggling to make their mortgage payment and pay their bills. A reverse mortgage enables you to use the equity in your home to pay off your current mortgage, pay down debts and increase your financial cushion. When understood and used properly, a reverse mortgage offers significant financial freedom for borrowers.
4
Use the Money How You Want
Reverse mortgage borrowers are required to pay off any existing mortgage balance on their property but there are no limits on how borrowers use the remaining proceeds from their loan. Many borrowers choose to pay-off credit card bills and other debt but some use the proceeds to remodel their home, travel the world or pay for college tuition for a child, grandchild or even themselves! How you use the proceeds from a reverse mortgage is up to you.
5
Tax Free
A reverse mortgage is tax-free way to access the equity in your home. In many cases selling your home or taking out a large home equity loan can be a taxable event. For example, selling a home you have owned for decades may trigger a large capital gains tax if the property value has increased significantly. The proceeds from a reverse mortgage are tax free which provides a real financial advantage to many borrowers. We always recommend that you consult a tax professional to understand the tax consequences of a reverse mortgage.
1
Save Time & Money
Our insider tips enable you to save time and money on your reverse mortgage. Learning how to compare proposals and lower your closing costs can save you thousands of dollars
2
Be Informed
Our 40+ year mortgage expert explains how reverse mortgages work and outlines the pros and cons. Be informed so you can determine if a reverse mortgage is right for you
3
Free & No Obligation
Our guide is 100% free and there is absolutely no obligation for borrowers. Our guide is a valuable information resource for anyone thinking about getting a reverse mortgage
Five Things You May Not Know About Reverse Mortgages
1
You Keep Ownership of Your Home
Borrowers who obtain a reverse mortgage maintain ownership of their home. Although a reverse mortgage enables you to pay-off your existing mortgage and eliminate your monthly payment, you do not lose ownership of your property. Maintaining ownership of your home enables you to pass it down to your heirs although there may be less equity in the property when you do.
2
You are Required to Pay Ongoing Housing Expenses
Although you do not make a monthly mortgage payment with a reverse mortgage you are still required to pay ongoing monthly housing expenses such as property tax and homeowners insurance. Borrowers are also responsible for the general upkeep and maintenance of the property. This is an important point for borrowers to understand because the failure to pay ongoing housing expenses can result in default and foreclosure.
3
You Can Buy a Home with a Reverse Mortgage
Most people use reverse mortgages to pay off the existing mortgage on their current home but you can also use a reverse mortgage to buy a home. Using a reverse mortgage to buy a home is different than using a reverse mortgage for a refinance so borrowers should understand how each method works. Using a reverse mortgage to buy a home requires a much larger down payment (~%50) than a using a regular mortgage to buy a home (~20%) but provides a potentially compelling financing option for borrowers who want to buy a home without the obligation of a monthly mortgage payment.
4
There are Different Types of Reverse Mortgages
Just like with a regular mortgage, there are different types of reverse mortgages. Borrowers can elect a fixed rate reverse mortgage or an adjustable rate reverse mortgage. A fixed rate reverse mortgage provides borrowers with certainty that their interest rate will not increase while an adjustable rate reverse mortgage provides borrowers with more disbursement options and enables them to take out more proceeds from the loan. Borrowers should understand their reverse mortgage options and work with their lender to select the program that is right for them.
5
A Reverse Mortgage Has No Set Length
A reverse mortgage does not have a set length like a regular mortgage. Instead, a reverse mortgage lasts as long as the borrower resides in the property. A reverse mortgage can last ten years, 33 years or potentially longer. Borrowers are required to pay off the reverse mortgage loan balance when they vacate the home for reasons such as selling the property or because the borrower moved into an assisted living facility for more than a year. Borrowers can also choose to pay-off the reverse mortgage at any time by refinancing it or by using their own funds to pay off the loan balance.
Sources
“What is a reverse mortgage?” CFPB. Consumer Financial Protection Bureau, August 30 2019. Web.
About the author
Harry Jensen, Mortgage Expert
Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. Harry is a licensed mortgage professional (NMLS #236752). More about Harry
