You Can Get a Reverse Mortgage If You Still Owe on Your Home

A reverse mortgage is a loan option that allows those 55 years or older to leverage the equity in their home to receive payments from the bank.  Some think that this only applies to those who own their home outright - meaning they do not have a current mortgage.  However, it is possible to get a reverse mortgage even if you still have a traditional ‘forward’ mortgage.  

Reverse mortgages can be appealing to seniors because of the immediate cash, the fixed payments over time, or the ability to draw on a line of credit as needs arise.  There is a lot of flexibility when it comes to the payment options. 

Besides the actual payments from a reverse mortgage, many are looking to leverage this tool to eliminate their current ‘forward’ mortgage payment.  Once retired, many live on a fixed income where large recurring expenses, like a mortgage payment, can be a big source of stress.  A reverse mortgage not only eliminates a payment to the bank, but it can create a payment from the bank!

In order to qualify for a reverse mortgage, the borrower must meet these criteria:

• 55 years of age or older
• House must be the primary residence
• Up to date on property taxes and homeowners insurance
• Able to maintain the property so it doesn’t fall into disrepair

As mentioned in the beginning of this post, the key to the reverse mortgage is having a large amount of home equity.  If you have a traditional ‘forward' mortgage, this is possible by comparing the balance on the mortgage to the current value of the property.  

The reason why the equity is so important is because a reverse mortgage must take the first lien position on the property.  So if the borrower has an existing ‘forward’ mortgage, that must be paid off using some of the proceeds from the reverse mortgage in order to close.  

Additionally, just like a traditional ‘forward’ mortgage, it’s possible to make principal payments towards the balance of the loan if you wish.  While a reverse mortgage is a negatively amortizing loan (the balance grows over the lifetime of the loan), principal payments can be made.  Keep in mind that these are optional, just like making a principal payment towards the balance of a traditional ‘forward’ mortgage.

I hope this has provided some clarity on an important aspect of the reverse mortgage.  If you have a traditional ‘forward’ mortgage, have a good amount of equity in your home, and are interested in a reverse mortgage, give the team at Equity Access Group a call.  This team specializes in reverse mortgages, and they can give you the details on your exact situation and if a reverse mortgage is possible with your existing mortgage balance.