Consider a Reverse Mortgage to Pay Your Property Taxes

If you are approaching the age of 62 and in search of financing to pay the property taxes on your primary residence, a reverse mortgage may be a better solution for you than a property tax loan. A reverse mortgage can also be utilized to repay existing property tax loans or supplement living expenses. The key benefit of a reverse mortgage is that rates are lower than property tax loans and you do not have to make a payment as long as your reside in your home.  Sound to good to be true? We have asked a leading industry expert to provide more details so you can assess if a reverse mortgage may be right for you.

What is a reverse mortgage?

Have you ever heard the term reverse mortgage and wondered what that really means? Like many readers they are bewildered by the term and don’t know what “reverse” means. Well, you are about to learn more about this unique product a find out what the term “Reverse” really means.

The most popular type of reverse mortgage is a product developed by FHA back in 1989 called the Home Equity Conversion Mortgage (HECM). Most people don’t call them HECM’s, they just call them Reverse Mortgages. This program allows customers 62 and older to take out a loan against their home and never make a payment on it as long as they reside in the property. Over time their balance will grow, thus the term, Reverse Mortgage. Reverse simply means the balance grows instead of decreasing like a traditional loan.

There are a couple of very important features potential borrowers needs to know before they take out a reverse mortgage. Most importantly is that the customer will retain title to their home, they are not selling their home to the lender. There will be a mortgage on the home that will have to be paid eventually.

Secondly, there is no income and minimal credit qualifying required to obtain the loan. The home is the main factor the lender looks at before approving the loan. Additionally, the borrowers are not liable for more than the value of their home, no matter how long they have the loan for. This is an important feature as it prevents individuals from having to payback more than their homes worth or leave a debt to their heirs they would be unable to pay.

There are a couple of things borrowers need to do once they take out a reverse mortgage to make sure they comply with the guidelines of the program. They will need to pay their property taxes (note: a reverse mortgage can be used to catch up delinquent taxes or payoff a property tax loan), their homeowners insurance, reside in the home as their primary residence and keep the home in good repair. As long as they go these things, they can keep the loan as long as they like.

Why do people get reverse mortgages? The reasons to get a reverse mortgage are numerous, but there are some common themes among most borrowers. Many times a customer is looking to payoff an existing mortgage, or personal debts. By eliminating these debts they can free up more cash flow and direct it to other living expenses. Sometimes a customer will want to do home improvement projects and will use the reverse mortgage as a funding source. A big motivator for many is simply having more peace of mind, knowing additional funds are immediately available should the need arise in the future.

Before anyone takes out a reverse mortgage they need to be fully informed and educated on all their options. It is recommended that customers work with someone who specializes in these loans. While the loan is simple to get, there are many details you need to be aware of before the deal is finalized. Be comfortable that the loan meets your goals before proceeding.