What Is a Reverse Mortgage?

If you are a homeowner aged 62 or older looking to supplement your income to pay for monthly expenses, medical costs, or home repairs, you may be eligible for a reverse mortgage. A reverse mortgage allows you to borrow money based on the equity of your home if you qualify. However, while there are benefits to a reverse mortgage, it is essential that you have a general understanding of the pros and cons of a reverse mortgage and that you are not pressured to purchase a reverse mortgage.

If you have questions about whether a reverse mortgage is right for you, do not hesitate to contact an experienced real estate lawyer at your earliest convenience.

Also known as a Home Equity Conversion Mortgage (HECM), a reverse mortgage allows you to borrow money using your home as security for the loan, provided you are at least 62 years old. It differs from other types of mortgages in that you do not need to repay the loan as long as you live in the home as your primary residence, continue to pay the required property taxes and insurance, and maintain the property according to FHA requirements. In most cases, the loan only gets repaid when you die or move.

You must meet the following requirements to qualify for a reverse mortgage:

• You must be 62 years of age or older.
• You must live on the property.
• You must have paid off a substantial percentage of your mortgage.
• You must have enough funds to continue paying taxes, insurance, home repairs, and homeowner association fees.
• You meet with a counselor who has been approved by the Department of Housing and Urban Development (HUD).
• You must apply and be approved by a lender.
• You may not have any outstanding federal debt or unpaid taxes.

How Is a Reverse Mortgage Different From a Regular Mortgage?

A reverse mortgage is different from a regular mortgage in the following ways:

• There is no age requirement for a regular mortgage, but you must be 62 or older to be eligible for a reverse mortgage.
• For a regular mortgage, you typically borrow a lump sum to purchase your property. With a reverse mortgage, the amount you borrow is based on a percentage of the equity you have built up in your property.
• With a regular mortgage, you make monthly payments to the lender, which includes taxes and insurance. If you have a reverse mortgage, the lender pays you a lump sum or monthly payments, but you must continue to pay taxes and insurance and maintain your property.
• With a regular mortgage, your balance will decrease over time. If you have a reverse mortgage, your balance will go up, and you will owe more than the amount you borrowed because interest will be added each month.

What Tips Should I Keep in Mind if I am Considering a Reverse Mortgage?

There are pros and cons to a reverse mortgage, so it is in your best interest to discuss your options with an experienced real estate lawyer and keep the following tips in mind:

• If you need cash, consider options like a home equity loan or a line of credit. This might be a better course of action, particularly if you only need to borrow a small amount of money, as reverse mortgages have high costs.
• Reverse mortgages can be costly, and lenders often charge upfront origination fees and closing costs. Ensure you understand all the fees and costs you will be responsible for paying before proceeding with this option.
• Beware of sales gimmicks or agents who want to make more of a profit by steering you toward more expensive loans.
• Do not be swayed by fear tactics. You should also proceed with caution if a lender or agent tells you that the government has endorsed the sale of reverse mortgages or offers educational seminars to sell reverse mortgages rather than educate customers.
• Avoid companies that charge fees to help you find a reverse mortgage. You should not be charged costly fees for something you can do on your own or with help.
• Consult with an experienced real estate lawyer. You must attend a counseling session before anyone can sell you a reverse mortgage. However, some counseling may be conducted by someone who is paid by the lender, meaning your interests may not be their top priority. It is highly recommended that you consult with a real estate lawyer who will discuss any questions and concerns you might have about a reverse mortgage and whether it is the right choice for you.

The Somerville Real Estate Lawyers at Lyons & Associates, P.C. Help Clients Navigate the Reverse Mortgage Process

If you are considering a reverse mortgage and you have questions or concerns, do not hesitate to contact the Somerville real estate lawyers at Lyons & Associates, P.C. We will discuss your financial goals, ensure that you understand the advantages and disadvantages of a reverse mortgage, and assist you with every step of the process if it is the right decision for you. To schedule a free, confidential consultation, call us today at 908-575-9777 or contact us online. Our offices are located in Somerville, Morristown, and Freehold, New Jersey, where we serve clients in Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, Morris Plains, and Monmouth County.

• Category: Real Estate