What is it?
A reverse mortgage is a special finance option available only to seniors, age 62 or over. It works by allowing seniors to turn their home equity into income, without having to sell the actual home. This can be a great option for low-income seniors looking for some additional income.
Who qualifies for one?
Reverse mortgages are available exclusively to seniors over the age of 62. There are specific qualifications for different programs, but they are some general qualifications. The applicant needs to own their home, the residence must be lived in the majority of the year, and it usually needs to be the applicant’s primary place of residence.
What are the fees?
In order to get into a reverse mortgage there will usually be an affordable set-up or application fees, however some lenders may waive this initial fee to entice a qualified applicant. Additional fees (such as appraisal fees, etc.) can often be tacked on to the loan itself, making it more easy and manageable for applicants to pay.
Is a reverse mortgage considered taxable income?
No, the IRS does not consider reverse mortgage payments taxable income and you will not be taxed on it. However, on the opposite side, this also means you cannot deduct any loan expenses or fees on your tax return.
Why is it called a reverse mortgage?
In a regular mortgage, you use debt to turn your income into equity. In a reverse mortgage, you use debt to turn your equity into income. This means you are literally reversing the method of purchasing a home. Instead of having extra income and wanting to purchase equity, you have equity and need additional income.
What does TALC mean?
TALC, or Total Annual Loan Cost, is certainly something you will want to ask potential reverse mortgage lenders about. TALC refers to the combined costs of a reverse mortgage to a single annual price quote. It is especially useful when comparing and contrasting various lenders.
How and when are the funds paid to me?
When you setup a reverse mortgage you get the option to decide just how you want to receive payments. Most reverse mortgage lenders offer monthly payments, credit accounts that can be accessed when you wish, and full one-time payouts.
If I get a reverse mortgage, will I still own my home?
Of course, the owners name will remain on the house’s deed until it is sold, or the owner’s estate is settled. Although the mortgage company will have a lien against your home, they will not own it and they cannot kick you out, or take your home from you.
Do I need a mortgage counselor?
Yes, you will need to see a mortgage counselor in order to get a counseling certificate, which will be your proof that you qualify for a reverse mortgage. The counseling session is free, and can be helpful too!
