Daily News

MBA Urges Regulators To Avoid Invoking Suitability Standards
The Mortgage Bankers Association (MBA) recently made a preemptive strike against what it obviously perceives as the next threat against the mortgage industry - "suitability standards." Read more...

 

Reverse Equity Mortgage Is It The Right Choice For You

In common language a reverse equity mortgage, it's the opposite of a traditional mortgage. In that instead of you paying a mortgage payment to a mortgage company the mortgage company makes the payment to you every month. The reverse equity mortgage loan amount is based on the current equity in the home, which is the difference in the market value and any mortgage attached to the property.

You will not have to pay income taxes on the monthly payments made to you as this is tax-deferred income, as interest will only have to be paid when the home is sold or the loan is paid off.

No re-payment will be required as long as the senior citizen lives in the home, but, there are a couple of rules to remember. The loan will be due and payable in the event that the home is sold, and the homeowner moves out for longer than 12 months, or the homeowner dies and at that time, accrued interest must be paid in full.

A reverse equity mortgage must be recorded as a first mortgage lien and if the current loan balance is less than 50% of the market value, this balance can be incorporated into the reverse equity mortgage. This means that the senior citizen will possibly be relieved of their present house payment.

The borrowers (or co-borrowers) must be at least 62 years old and with no current bankruptcy. The loan is on the home, so income or credit score doesn't matter and there is no personal liability for repayment of a reverse equity mortgage.

There are a few major reverse equity mortgage lenders and they all have different programs, but all will have the following criteria to determine how much cash the homeowner can obtain.

Back to Articles