February 24, 2019
What is a Reverse Mortgage?
We find there is a great deal of curiosity about the concept of reverse mortgages. As a homeowner ages, and becomes less likely to earn income by which to pay a monthly mortgage payment—yet having equity in their home and still wanting to live in it—a reverse mortgage can become an enticing and beneficial means of getting along in the world.
Homeowners over the age of 62 and possessing a considerable amount of equity in their home become eligible for reverse mortgages—usually home equity conversion mortgages, or HECMs, particularly if the home is worth less than about $680,000 (though for homeowners possessing properties worth more than this there are other reverse mortgage options). Unlike home equity lines of credit or home equity loans, HECM instruments do not require the borrower to have a good credit score or a good debt-to-income ratio, nor to have any income. Yet these loans do provide a homeowner with money to work with—either in monthly sums or in a large lump sum amount—while requiring nothing in the way of monthly payments to the lender. Rather, the home becomes collateral for the loan—and as payments are made to the homeowner by the lender, the equity in the home decreases. When the homeowner either dies or decides to move away and sell the property, any money made from the sale up to and including the full value of the loan then must be paid immediately to the lender to settle the loan (and generally if the home has become worth less than the amount of the initial loan in the intervening period, the difference is forgiven). Naturally this means the title to the home does not pass to heirs unless they are willing to pay off the balance on the loan to take possession of said title.
Our team here at Topouzis & Associates, P.C. does everything we can to be absolutely sure our clients are conveying and purchasing title clear of judgments and defects. And, yes, we help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property. Contact us if you’d like us to do this for you.