Minnesota Mortgage Blog

Have you heard about reverse mortgages, but wondered if they were for you? If so, heres a rundown on what they are and whom they can benefit.

They are called reverse mortgages because instead of an individual paying a lender, the lender pays the homeowner while repayment of the loan is deferred. Sometimes they are also called life mortgages. A reverse mortgage differs from other loans in that to qualify, there are usually no income requirements or credit checks. Additionally, the state of your health can not affect your participation.

Typically, borrowers 62 and over who own their homes outright are eligible for reverse mortgages. These loans can be a huge benefit as they convert some of the homes equity into tax-free money without your selling the home or relinquishing the title. The money from a reverse mortgage can be used any way you choose: for monthly living expenses, a vacation, remodelling, or any other financial needs you have.

There are often four payment choices in reverse mortgages:
1) Lump sum
2) Monthly amount for a set period
3) Line of credit
4) A combination of any of the above

The amount of money you can receive may be affected by your areas lending limit, your homes value, interest rates, and your age (or the age of the youngest spouse). Your reverse mortgage repayment typically is deferred to when your home is sold, you move out, or upon the death of the last surviving borrower.

Many people of retirement age own their homes outright but cant afford to maintain their retirement without the assets tied up in their homes. For those individuals, a reverse mortgage may be the perfect solution. But keep in mind that interest accrues over the entire life of the loan, and will have to be repaid after your home is sold. The good news is, as long as you live in the home and pay the property taxes, you can never outlive a reverse mortgage.