How a Reverse Mortgage Works

How a Reverse Mortgage Works

How a Reverse Mortgage Works

How would you like more information on how a HECM reverse mortgage works? In this article we'll cover the the differences, explaining how they work. If you recognize the advantages negatives and quirks, compared to a "regular" mortgage loan, you'll be ahead of the game.

1. The most important thing to fully understand; is when comparing a traditional mortgage loan to a reverse mortgage, you will be able to see there is virtually no difference. You retain ownership of the property, and the way that you're vested in title doesn't change. Should you choose to sell, payoff, or refinance your property, there is no penalty to do so. To top it off, any remaining equity is yours. If you have had a loan on your property in the past, you should be able to find these features to be identical.

2. What makes a reverse mortgage different is the fact you don't make payments as long as you live in the house as your primary residence. Upon all borrowers passing away or moving out, the mortgage will be have to be repaid, but as long as at least one of the borrowers live there, this is a payment free mortgage loan. This is a great way to ensure your loved ones have a place to live for the rest of their lives.

3. Seniors living their retirement with stress and worry is far too common nowadays. You can really see it when the realization that they will be able to outlive their savings account. If you have equity in your property, there are options. A reverse mortgage will be able to enable you to take a monthly income, a line of credit, or a lump sum of money to bridge the Social Security income gap. You may also incorporate the three different product to customize a mortgage loan for you.

4. The proceeds of a reverse mortgage are not taxable and is not going to have any affect on your Social Security. In the event you receive Medicaid, however, it is advisable to bring that to the attention of your mortgage loan officer. There could be specific details needed to best protect you.

To summarize, your ability to draw on your home's equity will be the advantage, while the disadvantage, if there has to be one, is that you are spending a portion of your equity. The quirkiness is that if you receive government assistance through programs like Medicaid, you need to be careful to not disqualify yourself.

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