A reverse mortgage is a type of loan that allows homeowners who are 62 or older to convert a portion of their home’s equity into cash or other types of proceeds.
How Does a Reverse Mortgage Loan Work?
The most popular type of reverse mortgage is the FHA-insured Home Equity Conversion Mortgage (HECM) loan. Unless noted otherwise, we’re referring to HECMs when we talk about reverse mortgages.
Unlike a traditional mortgage, with a reverse mortgage the borrower is not required to make monthly mortgage payments. Instead, they just need to handle property charges, like insurance and taxes, and upkeep. The loan balance is paid back when the homeowner sells the home, permanently moves out or passes away.
Reverse Mortgage Loan Benefits
The following is just a snapshot of the many benefits provided by reverse mortgages.
Supplemental Cash Flow
One of the primary benefits of a reverse mortgage is that it can provide additional cash flow for those who need it. For seniors who are struggling to make ends meet, a reverse mortgage can help cover living expenses, medical bills and other necessary costs.
No Monthly Mortgage Payments
Unlike a traditional mortgage, with a reverse mortgage borrowers are not required to make monthly mortgage payments. They only need to cover property charges, like taxes and insurance, and upkeep. This can be particularly helpful for those who are on a fixed income and cannot afford regular mortgage payments.
Flexibility
Reverse mortgages provide a great deal of flexibility because the borrower can use the loan proceeds however they see fit. They can use the money to pay off debt, cover home repairs or modifications or simply have it as a financial cushion.
Stay in the Home
With a reverse mortgage, borrowers can stay in their home as long as they continue to meet the loan requirements, which can be a huge relief for seniors worried about being able to afford their home while on a fixed income.
Non-recourse Loan
This means that neither the borrowers nor the heirs will owe more than the home is worth at the time it is sold, even if the home’s value is less than when the loan was taken out. This can provide significant peace of mind for people concerned about passing on debt to their heirs.
Interested in a Reverse Mortgage in Fresno, California?
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*There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.