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What is a Reverse Mortgage?

What is a Reverse Mortgage? Getting the Facts

At Cobalt Mortgage, we hear these questions all the time, “What is a reverse mortgage? Is it right for me? Can I qualify for this type of loan?”

You undoubtedly found this page because you’re considering this type of loan, and would like to get some information without making a commitment. This page covers a lot of ground quickly, but you can always get more personalized information by calling us at Cobalt Mortgage at (855) 926-2258.

First, it’s important to understand what a reverse mortgage actually is.

Answering the Question – What is a Reverse Mortgage?

A reverse mortgage is a home equity loan that allows homeowners, over the age of 62, to access a portion of their home equity and convert it into tax-free loan proceeds. A reverse mortgage is usually considered a loan for tax purposes.  We recommend you speak to a qualified tax advisor for your specific tax situation.  It’s also important to notify us about any special program you may have from any other government entity where you have benefits.

With a traditional mortgage you are required to make monthly payments, but this is not a condition of the terms of a reverse mortgage.  In fact, the first thing a reverse mortgage lender will do is pay off any existing mortgage or lien. Depending on the loan proceeds, they may also be able to provide you with a line of credit to use at your convenience.

Throughout the course of your loan, you will still be required to pay your property taxes, homeowner’s insurance, any homeowner’s dues and maintenance costs.

Obviously, this can be a life changing opportunity, giving retirees a chance to establish more secure financial footing, or simply improve the quality of their life. Our clients have used their loan proceeds to pay off their existing mortgage, pay down bills and medical expenses, add to their monthly retirement income, make home improvements, and deal with unforeseen expenses.
Indeed, a reverse mortgage can provide you with the financial assistance you’re looking for.

Reverse Mortgage

Additional Reverse Mortgage Information

It’s important to note that you will not give up ownership of your home.  When you get a reverse mortgage, you retain the title to your property and it stays in your name.

There are also no prepayment penalties, and you can pay off the loan anytime you wish without incurring a penalty.

Reverse mortgages are non-recourse loans.  This means that if the loan balance is greater than the value of the home when the property is sold, the lender cannot seek to recover the additional loan balance from you, the co-borrower, or the assets of your estate.

Repayment of the loan is not required until you or the last surviving borrower sell, move, or pass away.  You will still need to remain compliant with the terms of the loan, but as long as you continue to own the home and occupy it as your primary residence, the reverse mortgage does not become due.  Remaining complaint includes but is not limited to maintaining the home and keeping current on property taxes, homeowners insurance, and any homeowners dues.

Can I Qualify for a Reverse Mortgage? 

Eligibility will require meeting certain basic qualification, although they are not all inclusive.

For the property to be eligible for a reverse mortgage, it must meet FHA minimum property standards.  We lend on the following property types:

The loan amount will be based on the age of the youngest borrower, current interest rates, and the lesser of the appraised value of your home or sales price, and FHA maximum lending limits.

Planning your long term goals takes a great deal of care.  Let our team help answer your questions. You can get help calculating your loan amount by calling us at (855) 926-2258 or by filling out our online form.