Back to basics. Wells Fargo recently updated their reverse mortgage section with the latest definition of what is a reverse mortgage. While they do not list rates on their site, having the basic understanding goes a long way for a senior or loved one looking for basic information.
What makes it a “reverse” mortgage?
A reverse mortgage is exactly what its name implies — a loan whose features make it essentially the reverse of a traditional “forward” mortgage. Instead of making monthly payments, you can choose to receive them. That’s the “reverse” part of a reverse mortgage. Instead of turning your income into equity, you turn your equity into income.
That last feature — the ability to turn your equity into income — is what most distinguishes a reverse mortgage from other loans, and it’s what makes it so valuable to many senior homeowners. Having spent years repaying the mortgage that allowed you to buy your home, you can now tap into that investment to help you achieve your goals later in life. However you plan to use your equity — whether traveling, paying medical expenses, improving your home, or just adding a bit of cushion to your monthly budget — you’ll have a golden opportunity to put your nest egg to good use.
What happens to my home?
Nothing happens to your home — you remain the owner for as long as you live there, and you cannot be forced to move. Unlike a traditional mortgage, however, your balance cannot exceed the value of your home when you sell it. So no matter how much money you receive through your reverse mortgage, you cannot owe more than your home is worth. Having that assurance is important. After all, you’ve put a lot of money into your home, and you should have control over how to take it out.
Who is eligible?
To be eligible for a reverse mortgage, all owners listed on the home’s title must be at least 62 years of age and occupy the home as their principal residence for the majority of the year. The property must be a single-family or a two-to-four unit dwelling. Townhomes, detached homes, condominium units, planned unit developments (PUDs), and some manufactured homes are eligible.
Speaking with an approved reverse mortgage counselor is another important eligibility requirement. The Department of Housing and Urban Development (HUD) supervises counseling agencies that can work with you in person or, more commonly, over the phone. Be aware that a fee is charged for these services. Your Wells Fargo reverse mortgage consultant can provide you with a list of authorized counselors.