A reverse mortgage is a special type of loan allowing senior home owners 62 years or older to convert part of the equity in their homes into tax free cash/monthly payments without them having to sell their home, give up title or take on a new monthly mortgage payment.
The cash from a reverse mortgage can be used for anything that the home owner chooses. Common uses of reverse mortgage cash include supplementing retirement income to cover daily living expenses; repairing or modifying your home to fit your needs such as widening halls or installing a ramp, covering health care expenses, paying off existing debts, taking a vacation, paying property taxes, and preventing foreclosure. Funds can also be used to cover any adult care expenses, assisted living expenses, and any other long term care expenses that arise.
To find out if you can qualify you need to contact a professional. Some basic parameters are, you usually need to be 62 or older and own your own home. There’s no income or medical requirements to qualify and you may be eligible for a reverse mortgage even if you still owe money on a first or second mortgage.
Yes, there are payment options and different types of loans available. You can choose to receive the money as a lump sum, fixed monthly payments (for up to life), a line of credit or a combination of these. The most popular option - chosen by more than 60 percent of borrowers - is the line of credit, which allows you to draw on the loan proceeds at any time as needed. You must speak to a qualified professional to determine which type of payments are best for your needs and situation.
The funds are tax-free. A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if a person gets a lump sum payment from a reverse mortgage, any amount retained the month after he gets it would count as a resource and could affect Medicaid eligibility. For example, if a person receives $5,000 for home repairs and spends it the same calendar month, this would not affect resources. But if he didn't spend it all, the amount retained as of the first of the next month would count as a resource. If his total liquid resources exceed $2,000 for an individual or $3,000 for a couple, he would be ineligible for Medicaid. In addition, how much of the lump sum he could retain without affecting eligibility depends on the amount of other liquid resources he already has, such as money in bank accounts, savings bonds, etc. To be safe, you may want to consult a Medicaid expert.
While a reverse mortgage loan is outstanding, you continue to own the home and hold title to it. No payments are due while it is outstanding. The loan usually (but not always) becomes due and payable when you cease to occupy your home as your principal residence. This can occur if you (or the last remaining spouse, in the case of couples): sell the home, move away, or pass away
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