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- Free Reverse Mortgage Guide
- Mutual of Omaha has been helping customers for over 100 years
- Multiple disbursement options to fit your financial needs
- Personalized 24/7 customer service with strong borrower support
- Reverse mortgage loan options available for high-value properties
About reverse mortgages
A reverse mortgage is a unique financial tool that allows seniors to convert their home equity into cash without monthly payments. Designed for those aged 62 and older, reverse mortgages can provide extra income or financial flexibility in retirement.
How does a reverse mortgage work?
A reverse mortgage lets you borrow against your home’s value without requiring monthly payments. That’s different from a home equity loan, which requires you to make payments over a set period of time.
How do reverse mortgages work? It typically goes like this:
- You connect with a lender to discuss your options. It’s important to do your research and choose a top-rated lender with a strong reputation. For example, Mutual of Omaha has been serving customers for more than a century.
- You complete credit counseling to ensure you understand the terms and conditions of a reverse mortgage and the potential risks.
- You apply for a reverse mortgage and complete a home appraisal.
- Once approved, you’ll sign the closing paperwork.
- The amount of equity you can borrow depends on your age, the value of your home, and current interest rates. Generally, older borrowers with higher-value homes and lower outstanding mortgage balances can access more equity.
Depending on the lender, you can choose the type of payout. Some offer a lump sum deposit to your bank account; others provide monthly payments or a line of credit you can draw from as needed.
Reverse mortgage eligibility
Who can get a reverse mortgage? To qualify, you’ll generally need to:
- Meet age requirements: You must be 62 years of age or older
- Own your home
- Use the home as a primary residence and live there full-time
- Be able to pay property taxes, homeowners’ insurance, HOA fees, repairs, and maintenance costs
- Your home must also be in good condition and meet any other lender standards
Pros and cons of reverse mortgages
A reverse mortgage can be a valuable financial tool for retirees looking to supplement their income, but it also comes with risks. Understanding the benefits and drawbacks can help you determine whether it’s the right choice for your situation. Consider the pros and cons below before moving forward.
Pros
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You can stay in your home
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You can access additional cash
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No additional monthly payment1
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Loan proceeds aren’t taxed as income2
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You (or your heirs) won’t owe more than the home is worth
Cons
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Fees (origination fees, closing costs, and mortgage insurance premiums)
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Loan balance grows over time
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Interest isn’t tax-deductible until you repay the loan
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You will be responsible for ongoing home maintenance
1Borrowers must still pay property taxes, insurance, and maintain the home
2Loan proceeds are generally not taxable. Consult a tax advisor about your situation
FAQ
How can I avoid reverse mortgage scams?
To avoid reverse mortgage scams, always be wary of offers that seem too good to be true and high-pressure sales tactics. Verify the legitimacy of lenders and advisors, and avoid unsolicited offers. Be cautious of contractors recommending reverse mortgages for home improvements or anyone suggesting a reverse mortgage to resolve foreclosure issues.
Ensure any financial planner or relative does not misuse a power of attorney to commit fraud in your name. Consult with trusted, HUD-approved counseling agencies and familiarize yourself with common scams, such as those involving fake veteran-specific reverse mortgages.
What happens if I need to temporarily move out of my home for medical treatment?
A reverse mortgage typically allows a short absence if you need to move out for medical treatment. Generally, you can be away from your home for up to 12 consecutive months for medical reasons before it affects your reverse mortgage. However, it’s crucial to inform your loan servicer and provide the necessary documentation to support your temporary relocation due to health issues.
Can I add a spouse or family member to the reverse mortgage?
Adding a spouse or family member to a reverse mortgage is possible but typically must be done at the time of the original loan agreement. If your spouse or family member wasn’t part of the initial agreement, they may not be protected by the reverse mortgage’s non-borrowing spouse provisions, which preserve certain rights if the borrowing spouse passes away.
Consult with your lender and a reverse mortgage counselor to understand the specific requirements and possible implications of adding someone to your reverse mortgage.
How does a reverse mortgage affect my eligibility for government assistance programs?
A reverse mortgage can affect eligibility for need-based government assistance programs such as Medicaid and Supplemental Security Income (SSI). Loan proceeds received as lump-sum or monthly payments could be counted as assets if not spent within the month they are received, which might disqualify you from receiving benefits.
It’s important to plan how you receive and use reverse mortgage proceeds and consult with a financial advisor or attorney to understand how a reverse mortgage could affect your specific situation regarding government assistance programs.
Should I get a reverse mortgage?
Considering the risks, costs, and expert opinions, should you get a reverse mortgage? It could make sense if you:
- Need additional retirement income
- Own your home or have almost paid off the mortgage
- Don’t plan to leave the home to your heirs
You might think twice about whether a move is possible or whether you want to ensure the home stays with the family when you pass away. In that case, you might consider reverse mortgage alternatives, such as a home equity loan or home equity line of credit (HELOC).
How we selected the best reverse mortgage company
Since 2020, LendEDU has evaluated mortgage companies to help readers find the best mortgages. Our latest analysis reviewed 102 data points from 6 lenders and financial institutions, with 17 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.
Our Pick for Best Established Brand
- Free Reverse Mortgage Guide
- Multiple disbursement options to fit your financial needs
- Personalized 24/7 customer service with strong borrower support
- Reverse mortgage loan options available for high-value properties