January 29, 2019
What is a Reverse Mortgage?
As homeowners age, they find they have paid down a great deal of the principal on their home, and eventually they may even pay the home off in full. (That’s the goal, at any rate, because that’s when a homeowner finally takes actual ownership of a property from lien holders and lenders.) But when an owner wants to stay in the home—whether they have fully paid off the home or if they are merely approaching that milestone—rather than selling it to use the proceeds to purchase another home, they sometimes feel it makes sense that they should to be able to utilize this investment into which they have poured their lives for so many years as a source of income or to make improvements. That’s where reverse mortgages come in.
Reverse mortgages are loans, generally secured by the home, which allow the borrower to have access to the property’s monetary value without having first to sell it. Naturally, these are generally aimed at older homeowners, who still have to pay property taxes and any homeowner’s association fees that may come due. There are no monthly payments on the reverse mortgage, usually, but instead the instrument will push payment of the loan forward either to the time when the owner dies, or when they decide to sell or move out of the home. Interest is usually added to the balance of the loan on a monthly basis, meaning it is possible that the payback amount on paper may amount to more than the market value of the home when payment comes due—but a decedent’s estate usually is not required in fact to pay more than the market value of the home back to the lender.
Of course, as with any property or loan transaction, there are tax and other financial implications. A major one is that, once the loan becomes due, one’s estate will need to sell off the home to pay the loan, leaving no proceeds or property available to one’s heirs, if there are any.
If you’re looking to get into a home on which to build equity that may be used to smooth out income issues in your golden years—whether in Homosassa Springs, Florida; Boston-Cambridge-Newton, Massachusetts; Providence, Rhode Island, or any other city in these three states—give us a call. Here at Topouzis & Associates, P.C., we’re experienced at title searches and title curative services, and we are supported in supplying title insurance by numerous underwriters. We’ll put our vast experience to work for you, ensuring clear sailing through the closing process and beyond.
