Reverse Mortgage: Get Paid For Your Equity
A reverse mortgage is an option available to seniors 62 and older where a lender pays you instead of you paying them. You sell the lender equity in your California home, and they give you a lump sum, line of credit, or make payments to you.
No Monthly Mortgage To Pay
You no longer pay your monthly mortgage payment—you can take it right out of your budget.
No Taxes Due
The money you receive is considered by the IRS to be “loan proceeds,” which makes it non-taxable.
Get Extra Money
Use the money you receive however you like. Pay off debt, fund medical costs, or put it in the bank.
Keep Your Government Benefits
If you’re on Social Security or have Medicare, for example, there’s no impact on your benefits.
WHAT IS A REVERSE MORTGAGE? WHY SHOULD I CONSIDER ONE?
Reverse mortgages are designed for homeowners who are 62 or older and have considerable equity. With a reverse mortgage, you borrow against that equity and get cash. You can use the money to supplement your income, help pay for healthcare expenses, or use it for any other purpose.
A reverse mortgage works like this:
- You have at least 50% equity in your home, or it’s paid off You apply for a reverse mortgage loan program
- A lender checks your credit and reviews property details
- If approved, the loan is funded and you stop making mortgage payments (you continue to pay the property taxes and homeowners’ insurance, plus take care of basic home maintenance and repairs)
- You get proceeds in your choice of a lump sum, line of credit, or periodic annuity payments
- The loan balance becomes due when you pass away or move out of the home
WHAT’S THE DIFFERENCE BETWEEN A REVERSE MORTGAGE AND A TRADITIONAL MORTGAGE?
Here’s how the two differ:
- Loan amount issued in a lump sum and is used to buy or refinance a home
- Loan repaid in monthly installments
- Property is considered collateral
- Borrower gets either a lump sum, line of credit, or regular payments made to them
- Loan repaid when the homeowner passes away, sells the house, or moves out
- Loan granted against the equity in a home
HOW MUCH DOES A REVERSE MORTGAGE COST?
The costs can vary depending on the loan and lender. Here are some costs that are typically associated with a reverse mortgage loan:
- A fee to cover the counseling from a HUD-approved mortgage counselor
- Origination fees (cannot exceed $6,000)
- Closing costs such as an appraisal, title search, inspection, recording fees, etc.
- Initial mortgage insurance premium
There are also ongoing costs, which include:
- Servicing fees
- Annual mortgage insurance premium
- Homeowners insurance
- Other types of insurance, such as flood insurance
- Property taxes
WHAT TYPES OF HOMES QUALIFY?
Does your home fit the program? It likely does because all of the following types of properties are eligible. The main point to remember is that your home must be in good condition.
- Single-family home
- 2-4 unit properties
- Manufactured homes
WHAT IF I HAVE AN EXISTING MORTGAGE?
You can pay off your existing mortgage with the proceeds of your reverse mortgage. For example, if you owe $200,000 on your existing mortgage and qualify for a $250,000 reverse mortgage, that would be enough to pay off your existing loan and leave you with $50,000.
Estimate your monthly mortgage payments to find out what selling price best fits your budget.
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