Reverse Basics

Well, I figured people were sick of hearing about the basics of a reverse mortgage but then a friend of mine asked me,"What exactly is a reverse mortgage?" So I guess I will explain it in basic terms.



An FHA insured reverse mortgage allows you to pull equity from your home. The amount allowed to you is based on your age, appraised value, and current interest rates. You must be 62 years of age or older and the property must be your primary residence. If you currently have a mortgage on your property the reverse mortgage would pay that off and whatever is left is yours. That supplements your income because you no longer have to make that monthly mortgage payment.



You can receive the money that is available to you a few different ways:

1. Lump Sum


2. Line of Credit


3. Monthly Payment


4. Combination of the above

The most common way people take their money is a small lump sum and the rest in the line of credit. You can draw from that line anytime you want in any denomination. The nice thing about the line of credit is that whatever remains in the line is not getting charged interest and is not owed back. Also, it has a credit line growth rate so every year more money is added to the line.

The proceeds from a reverse mortgage can be used for anything you want. I have clients that take a lump sum and go buy a second home in Florida...now they have no payment on either property. You are still responsible for paying your property taxes and your homeowners insurance. These are tax free proceeds and it does not affect social security or medicare.

You always own the home, the bank never owns your home. It is a non recourse loan meaning that you never owe more than your home is worth. For example, if you received $600,000 over your lifetime from a reverse mortgage and at the time the house had to be sold it was only worth $500,000...the government "eats" that $100,000 difference. No one is ever personally responsible for this debt.

Some exciting news is that you can now use a reverse mortgage to purchase a house. Great for those of you that wish to down size or move closer to family and friends.

An FHA reverse mortgage is a fantastic financial tool that allows you to truly enjoy your senior years and stay in the home that you love without the fiancial stress.

If you have any questions or would like more information please email me at floriomia81@gmail.com or you can reach me at 401-451-1925.

Thanks for reading!

Mia