As my mother told me: if it sounds too good to be true, it probably is. I know this thought jumps into your head when you start to read about a Home Equity Conversion Mortgage – ‘free’ money from my home with no monthly payment???? If you are 62 or over, you may have just found the goose that laid the golden egg.
A reverse mortgage in Memphis is exactly what the name implies. Rather than you paying a monthly payment to a bank, the bank pays you. The requirements are simple:
You must be at least 62, live in and own your home plus have a bit of equity. The reverse mortgage lender will have your property appraised to determine its true market value and this will determine, along with your age, how much money you can receive from your house.
There are no income restrictions or qualifications. Reverse mortgages are not considered income;therefore, they are not taxable. They do not affect your social security benefits or your Medicare entitlements. You continue paying your property taxes and your homeowners insurance and keep living in the home as your principal residence.
This tool called “reverse mortgage” is actually a loan, hence an interest rate. This means nothing is really “free”. It does however, allow senior homeowners to convert part of their equity into cash without having to sell their home. Because it is a loan, you are receiving money and you are not paying a monthly mortgage payment as long as you continue to live in your home as your primary residence. But you can if you want to – you can always make mortgage payments of any amount, at any time. Interest is added to your balance and paid back when the house is sold.
This is a loan and therefore it must be repaid at some point. It is eventually repaid with interest should you sell, pass away, or no longer live there as your principal residence. You remain responsible to pay real estate taxes, homeowners insurance and maintenance expenses which you would have to pay with or without any kind of a mortgage. It’s always your home!
With this explanation, the picture becomes clearer, right? You enjoy financial independence, tax free and not repayable until a date sometime in the future, all while remaining in your home. This is as close to a win‐win situation as one can get in this day.
It is easy to see that anyone who is cash‐poor, but house‐rich, should at least look into this program and see how it works for them. There is nothing to lose by asking questions. The typical reverse mortgage is called a Home Equity Conversion Mortgage or HECM (pronounced HEK‐UM). The federal government through the Department of Housing and Urban Development (HUD), insures these loans. They are no credit score requirements, but we do evaluate your cash flow to make certain that you can afford to maintain the home. The money can be used for any purpose that you choose, after paying off any existing liens.
HECMs in Memphis also require all applicants to meet with an independent housing counselor from a HUD‐approved housing counseling agency. An additional benefit of a HECM mortgage is the following: should a borrower have to move out of his or her home and into a nursing home or other medical facility, they have up to 12 months before the loan starts to become due. This enhances financial planning greatly. As always, make sure you check with your trusted advisors for more information.
Do you have questions? Our Memphis reverse mortgage specialist at FirstBank, Chris Brundige would be pleased to assist you with any questions or to help you get started. Please call (901) 472-1301 or visit us at Reverse Mortgage Lenderintn.com to calculate your reverse mortgage.