Fratello & Fox, P.C.

516.496.0730

ATTORNEYS AT LAW

A reverse mortgage is a loan that allows homeowners to borrow against the equity in their home and does not require repayment as long as the debtor remains in the home.  The loan is often paid off with the proceeds from the sale of the home.  The pay off amount cannot exceed the amount your home is worth.  The government protects lenders if your home’s value has declined below the loan value. 

 

How Do I Qualify for a Reverse Mortgage?

»You must be at least 62 years of age.

»You must own a 1-4 family home, condo or coop that can be paid off with the reverse mortgage loan.

»You will also be required to speak with a HUD approved counselor before securing the loan.  There is no charge for the counseling.

 

How Can I Receive the Proceeds?

»Line of credit; lump sum; preset monthly payments for a fixed period; and you may also combine a line of credit with a lump sum or fixed monthly payment.

 

How Much Can I Borrow?

»The amount of the mortgage depends on the age of the borrower, the interest rate at the time of the closing and the value of the home securing the debt.

»The total amount of the loan is also limited by a local FHA lending limit.

 

What Are the Loan Costs?

»You should expect closing costs which can also be financed as part of the loan.

»Like many other loans, interest accumulates during the life of the loan.

»It is also important to note that your heirs will receive a lesser value for the home.

 

      Loan proceeds can be used to pay for anything you wish; home repair, trips, outstanding debt, property taxes, life insurance, long-term care or long-term care insurance among other things.  Loan proceeds are not considered income, so loan payments will not affect social security payments, Medicare benefits or Medicaid benefits and no tax is due on the loan payments.

 

      The reverse mortgage may be a very useful tool for older Americans; especially in light of the new Federal law that denies Medicaid benefits to individuals who have too much equity in their home.  If you are considering a reverse mortgage, you should speak with a loan advisor to find out more information.

 

Dated: 3/1/2006

Reverse Mortgages

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