Paul Scheper, CRMP, CSA, MBA
Paul E. Scheper (CRMP, CSA, MBA) answers the 5 Most Common Questions about Reverse MortgagesReverse Mortgages are simple, and not complicated, because of these five words -- IT IS JUST A LOAN.”— Paul E Scheper
At first glance, reverse mortgages might seem a little confusing. The good news is they are not complicated once you know the basics and when you compare them side by side with a traditional mortgage. Quick refresher on the definition of a reverse mortgage -- in just five words -- It is just a loan.
Here are the most common 5 questions that people ask me all the time.
1. What is a Reverse Mortgage?
In five words or less: It is just a loan.
More specifically, a reverse mortgage is a loan that enables older homeowners, age 62 and older, to convert a portion of their home equity into tax-free cash* without giving up ownership and without being required to make monthly mortgage payments. You will still need to make payments for taxes, insurance and property maintenance. For the right person, at the right time, and for the right reason, a reverse mortgage can, in many cases, help homeowners to never outlive their money and to be more comfortable in retirement.
2. Why do people get reverse mortgages?
Since 1989, when reverse mortgages became federally insured and backed by the government, there have been over 1 Million reverse mortgages originated in the USA. The reason most people are attracted to a reverse mortgage is because it helps them with their number one retirement goal, which is to NOT outlive their money. It helps many homeowners to age in place – to stay in their home possibly for the rest of their lives. Making monthly payments on a mortgage is optional. With a reverse mortgage, the monthly payment can be deferred and paid at the end of loan, instead of every single month. With a reverse mortgage, many people feel a sense of comfort and confidence during their retirement years. Most folks are looking for a feeling of independence and financial freedom. They want to supplement their retirement income by controlling their budget to sustain a comfortable and safe retirement.
3. What is the main thing to I need to know?
The main thing to know about a reverse mortgage is that IT IS JUST A LOAN. It’s almost the same as a traditional loan, but not quite. A reverse mortgage has an age minimum, a property type requirement, an equity eligibility test, and other nuances. It’s also very similar to a traditional home equity line of credit, but with some distinct differences. The main thing to know is that monthly payments are not required and that the homeowner chooses when and how much to pay each month.
4. How do I qualify?
It’s easy to see if you qualify for a reverse mortgage. All you need to provide is your age, property type, and your home equity. With a reverse mortgage, the homeowner has to be at least age 60, and have lots of equity remaining in the home. You will be required to pay off any existing mortgages and make sure you can afford to make your regular property tax, insurance, and association dues (just like is required on all loans).
5. What are the downsides?
The main downside is that not everybody qualifies for a reverse a reverse mortgage. Reverse Mortgages are secure and are designed to provide ample consumer protections. Home safety, financial assessments, counseling sessions, and non-recourse terms help provide further safeguards throughout the process. It was created to help aging homeowners to safely and securely access some (not all) of the unused equity and convert it to spendable cash, in order to live a more comfortable retirement.
Paul E. Scheper, President
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