Reverse mortgages can be a bit tricky to understand, especially when it comes to who actually owns the home once one is taken out. Let’s clear up some common misunderstandings and explain what a reverse mortgage really means for home ownership.

What is a Reverse Mortgage?

A reverse mortgage is a special type of loan available to senior homeowners that allows them to convert part of the equity in their home into cash. But unlike traditional loans, you don’t have to pay it back monthly. Here’s the kicker: even with a reverse mortgage, you still own your home. That’s right, the title stays in your name, not with the bank.

You Stay in Control

When you get a reverse mortgage, you don’t hand over ownership to the lender. You keep the title and remain the owner. You can even use the money from the loan to help pay for things like a second home or to cover everyday expenses. There are no rules on how you use the money.

Your Responsibilities

Even though you get to access cash, you still have some responsibilities:

• Paying Property Taxes: Just like any homeowner, you need to keep up with property taxes.
• Maintaining the Home: Keeping your home in good shape is a must.
• Homeowner’s Insurance: You’ll need to continue paying for homeowner’s insurance.
• Primary Residence: You have to live in your home most of the time since it needs to be your main residence.

If you don’t meet these conditions, the loan could default, and like with any mortgage, the lender could foreclose on your home if problems aren’t resolved.

How It Works

In a regular mortgage, you pay the lender every month. With a reverse mortgage, it’s the opposite. You receive money and don’t make monthly payments back to the lender. As you get money from the reverse mortgage, your equity decreases, and the loan amount increases due to interest and fees.

Paying Back the Loan

A reverse mortgage is still a loan, so it does need to be paid back eventually. This usually happens when you sell your home, pass away, or don’t follow the loan terms. If you sell your home, you pay off the reverse mortgage with the sale proceeds, and any leftover money goes to you or your heirs.

What Happens When You Pass Away?

If you die and your heirs want to keep the home, they can pay off the reverse mortgage themselves. They’re not responsible for more than the home’s worth if its value goes down, thanks to non-recourse loan features.

Conclusion

With a reverse mortgage, you still own your home and have the freedom to make choices about it, provided you meet the loan conditions. It’s a flexible way to access cash tied up in your home and can be a strategic financial move for some homeowners.

If you’re thinking about how a reverse mortgage could fit into your financial strategy, or if you have any questions, feel free to reach out. I’m here to help guide you through your home financing options.

Chenine Lozano, Real Estate Finance Expert
W: (562) 620-7662
C: (562) 762-7511
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