Reverse Mortgages
A reverse mortgage is a government insured program for seniors over 62. Qualified homeowners can receive tax free money that ranges from approximately 40% to 75% of your homes value. You do not have to make repayment as long as you live in the home. When the last surviving spouse dies or permanently moves from the home the loan plus interest is repaid. Government insurance guarantees the loan balance will not exceed the value of your home.
Title remains with the homeowner. You can use the funds for any purpose. The money can be taken as a lump sum, monthly payments to you, or a combination of cash and income. There is no requirement for good credit and theres no income requirement to qualify. If you have an existing mortgage it can be paid off, eliminating your monthly mortgage payment. This is possible if your qualify for an amount equal or greater than your current loan.
There are several different reverse mortgage programs. Fannie Mae Home Keeper®, Jumbo Cash-Out loan, and the HUD insured Home Equity Conversion Mortgage (HECM) are three such programs. As demand increases, more reverse mortgage programs from different organizations will become available for your home in Houston.
It is called a reverse mortgage because you borrow money from a lender, but the lender makes monthly payments to you, rather than you making monthly payments to the lender. All interest is paid at the end of the loan, rather than in the beginning.
What are some of the benefits of a reverse mortgage?
- Strengthen your personal and financial independence.
- Help pay for health care or other needs.
- You can never lose your home in foreclosure as long as you maintain the property tax and insurance payments.
- The loan is only paid off when the house is sold by you or your heirs, or all borrowers move out of the house.
- Keep your Medicare or Social Security benefits.
- Use it as a credit line and draw upon it as needed.
- Get all your cash right away.
- Get the best of both—get cash now and have a balance in reserve to use as a credit line.
- No Income Requirements: The homeowner does not need to be working and is not qualified based on income.
As the homeowner receives monthly cash income, the loan balance increases. In the following twelve-month example, the homeowner begins with a debt-free home. As money is received by the homeowner, the mortgage grows. By the end of month twelve, the homeowner owes the bank $6,000 plus $232.44 interest. All Reverse Mortgage loans have a variable rate.
Assumptions*
| Regular monthly advances |
$500 |
| Annual interest rate |
7.0 % |
| Monthly interest rate |
.583% (.07 / 12) |
| 0 |
0 |
0.00 |
0.00 |
$500.00 |
| 1 |
$500.00 |
$2.92 |
$502.92 |
$500.00 |
| 2 |
$1,002.92 |
$5.85 |
$1,008.77 |
$500.00 |
| 3 |
$1,508.77 |
$8.80 |
$1,517.57 |
$500.00 |
| 4 |
$2,017.57 |
$11.77 |
$2,029.34 |
$500.00 |
| 5 |
$2,529.34 |
$14.75 |
$2,544.09 |
$500.00 |
| 6 |
$3,044.09 |
$17.76 |
$3,061.85 |
$500.00 |
| 7 |
$3,561.85 |
$20.78 |
$3,582.63 |
$500.00 |
| 8 |
$4,082.63 |
$23.82 |
$4,106.44 |
$500.00 |
| 9 |
$4,606.44 |
$26.87 |
$4,633.31 |
$500.00 |
| 10 |
$5,133.31 |
$29.94 |
$5,163.26 |
$500.00 |
| 11 |
$5,663.26 |
$33.04 |
$5,696.29 |
$500.00 |
| 12 |
$6,196.29 |
$36.15 |
$6,232.44 |
$500.00 |
*Many criteria are considered when determining the reverse mortgage loan amount, interest rate, etc.
**We have a reverse mortgage specialist in our Houston office to assist you on any questions you might have. The reverse mortgage is a great tool for your retirement if used properly.
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