4 Reverse Mortgage Facts You Probably Didn't Know

A reverse mortgage loan offers homeowners age 62+ the opportunity to convert the equity in their homes into funds that can supplement retirement income. This strategic financial tool helps those who are entering their golden years achieve peace of mind through financial stability.

As with many loan agreements, reverse mortgage loans are often surrounded by misconceptions including that the bank will own your home or that your loved ones will inherit the responsibility to pay for the loan after your death. In truth, these loans have been created specifically to meet the unique needs of seniors.

Reverse mortgage loans have become so popular that as of 2016, the Federal Housing Administration has backed over one million reverse mortgage loans, helping borrowers focus on managing their financial concerns while they plan for a more sustainable retirement.

As with any financial investment or decision, it is important that you take the time to educate yourself and look at your specific situation to determine if a reverse mortgage is right for you. Reverse mortgage loans are stronger and better protected than ever!

Here are four reverse mortgage facts that may surprise you:

1. A reverse mortgage is a tax-free loan

One of the most popular aspects of the reverse mortgage loan is that all funds received are considered loan proceeds rather than income, so they are not taxed. Other retirement investments may be taxed as you draw on them, making this an especially beneficial source of cash for seniors.

2. Borrowers can retire comfortably in their own homes*

As a reverse mortgage loan borrower, not only do you continue to live in your home and receive regular cash payments, but you will continue to own it. The loan does not become due and payable so long as all loan obligations are met, including routine maintenance and paying taxes and insurance on the property.

3. You can eliminate monthly mortgage payments*

Unlike with most conventional loans, a reverse mortgage loan does not require monthly mortgage payments. However, borrowers must continue to pay taxes, insurance, and home maintenance as well as comply with loan terms to avoid foreclosure. This frees up the monthly loan proceeds for other expenses or investments.

In a typical situation, if a borrower lives alone at the time of the loan’s inception, the loan balance is deferred until the borrower dies, sells the home or permanently leaves the home.

4. Borrowers can use the reverse mortgage funds at their discretion

Choose to pay off credit card bills or other expenses, increase your monthly cash flow, fix up your home, improve your quality of life, or put money into an emergency savings account – the choice is yours.

Establish Financial Independence. Enhance Your Life.

Find Out if a Reverse Mortgage Loan is Right for You

1 Pew Research Center 2012, “Baby Boomers Retire,” December 29, 2010.
2United Nations, World Population Prospects: The 2008 Revision (New York: United Nations Population Division, 2009).
3National Institute on Retirement Security, “The Continuing Retirement Savings Crisis, ” March 2015.
4Joint Center for Housing Studies of Harvard University, “Housing America’s Older Adults Meeting the Needs of an Aging Population,” 2014

3A reverse mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). AAG works with other lenders and financial institutions that offer reverse mortgages. To process your request for a reverse mortgage, AAG may forward your contact information to such lenders for your consideration of reverse mortgage programs that they offer.Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes or insurance payments, or does not otherwise comply with the loan terms. NMLS# 9392 (www.nmlsconsumeraccess.org). American Advisors Group (AAG) is headquartered at 18200 Von Karman Ave., Suite 300, Irvine, CA 92612 These materials are not from HUD or FHA and were not approved by HUD or a government agency.
V11082016 *If you qualify and your loan is approved, a HECM Reverse Mortgage must pay off your existing mortgage(s). With a HECM/Reverse Mortgage, no monthly mortgage payment is required. **Consult your financial advisor. © 2017 American Advisors Group, All Rights Reserved NMLS# 9392 18200 Von Karman Ave., Suite 300, Irvine, CA 92612

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