A reverse mortgage is a specialized loan product that is designed to provide an income resource for homeowners that are 62 years old or older. Unlike a personal loans or a student loan, a reverse mortgage does not have a monthly payment obligation.
Reverse Mortgage
When a senior applies for a reverse mortgage, they will have to undergo credit counseling by a federally approved credit counselor. This requirement is mandated by law, and there are no exceptions to the rule. Seniors with limited income may be able to receive financial help to cover this expense.
Credit counseling is required to ensure that the home owner understands completely how the loan program works. This program is designed to provide seniors an extra source of income. It is not a bridge loan, and it is not a mortgage. It is a loan that is only repaid once the owner of the property dies or moves from the residence permanently.
The amount of your reverse mortgage will be based on the value of your home. The loan cannot exceed the home’s value because it will be repaid out of the sale of the home.
A reverse mortgage, by law, can be the only lien on the home. If the home owner has a current mortgage on the home, it must be paid in full from the reverse mortgage proceeds. Once the reverse mortgage has been granted on the home, you cannot take out a home equity line of credit, second mortgage or any other loan product that uses the home as collateral.
Home owners can only take out this type of loan on their main residence. If at any time during the loan period the home is no longer the main residence of the owner, the loan becomes due in full.