What is a reverse mortgage? In general, it is a loan product that is available to seniors who would like to turn their home equity into cash, to improve liquidity or other purposes. In a way, the name itself provides some key information. With a regular mortgage, the borrower is required to make monthly payments to the lender over the lifetime of the loan. In a reverse mortgage, this is flipped around, so that in some cases, it is the lender who makes monthly or regular payments to the borrower. For many borrowers, this reversal is very important because it takes away the stress of having to worry about monthly mortgage payments while providing additional cash for retirement.
If you are looking for more answers to the question, “What is a reverse mortgage?”, you have come to the right place! Just give us a call at 800-791-5626 or you can also send us an email via our online contact form. Whether you are looking for a comparison of reverse mortgage pros and cons, or facts and figures relating to reverse mortgage loans, we have the answers that you are looking for.
What is a Reverse Mortgage? – Some Key Aspects
One of the important things to keep in mind when researching the question, “What is a reverse mortgage?”, is that the details of particular reverse mortgage loans may vary from person to person and loan to loan. There is some flexibility inherent in this type of product. That said, here are some key aspects that tend to apply to reverse mortgage loans in general.
- Reverse mortgage loans are also known as Home Equity Conversion Mortgage (HECM) products. In an HECM, a borrower that is 62 or older and owns a home offers equity in that property in return for cash proceeds. There is no transfer of ownership. The borrower continues to stay in the residence and payment of the loan only takes place when the borrower (or all of the borrowers) leave the home.
- Reverse mortgage loans are offered to seniors. That is, a borrower must be at least 62 years old in order to qualify for this kind of product.
- The borrower needs to be the owner of the home, and that property must be his or her primary residence. This requirement is not usually a problem for seniors who are already happy with where they are living. For example, a borrower who lives in Los Angeles County, California (or Ventura County, Santa Barbara County, etc.) may wish to continue living in the same house and county, to be near family members or friends. Primary residence is considered when living permanently in the home a minimum of 183 days per calendar year.
How Are Reverse Mortgage Payments Received?
Another question often asked after, “What is a reverse mortgage?”, is “How will the cash be paid out?” Payment can be made in various ways. For example, reverse mortgage lenders might make monthly payments to borrowers, or payment can come in the form of a lump sum, either for the entire amount or for part of it. Additionally, a lender might offer a line of credit for the borrower to use. The payment structure might also be made up of some combination of these. With the multiple payment options available, there is a lot of flexibility with this type of loan, making them ideal for many California seniors.
What are a Reverse Mortgage Benefits?
Aside from asking, “What is a reverse mortgage?”, many California seniors also look for information regarding the benefits this type of product offers. Benefits include:
- Borrowers do not have to worry about making monthly payments to a lender.
- Reverse mortgages fall under the category of non-recourse loans. This means that the amount the borrower owes cannot go above the value of the property, when it is time to pay back the loan. This ceiling offers borrowers additional peace of mind.
- The cash proceeds from this type of loan are tax-free (consult your tax advisor).
Learn More Information on What a Reverse Mortgage Is
For more answers to the question, “What is a reverse mortgage?”, please feel free to get in touch with us. Our reverse mortgage lenders have a wealth of experience in this industry, so you can rest assured that they will be able to help answer all of your questions. You can call us at 800-791-5626 or send us an email via our online contact form. We would be happy to help with all of your reverse mortgage loan needs.