What's Involved in a Mutual of Omaha Reverse Mortgage
- A reverse mortgage lets seniors access their home equity for a more comfortable retirement. Learn what advantages a Mutual of Omaha reverse mortgage may offer.
With a Mutual of Omaha reverse mortgage, older adults can use the equity in their home to satisfy debts, supplement a fixed income or create a safety net for unexpected expenses. However, to better understand the advantages a Mutual of Omaha reverse mortgage may offer, it's helpful to understand exactly what a reverse mortgage is and how the lending process works.
What Is a Reverse Mortgage?
Reverse mortgages let homeowners borrow against the equity in their home and property while retaining the title. These loans don’t require borrowers to make monthly payments. Instead, they’re typically paid back once the borrower or qualified non-borrowing spouse sells the house, moves away or dies, using proceeds from the sale of the home or a refinance mortgage.
How a Reverse Mortgage Works
When you get a reverse mortgage, you’re borrowing against the equity in your home, while retaining access to the title. If you’re approved for the loan, the borrowed money typically isn’t taxable and may be used for any purpose. Depending on the lender and type of loan, you can choose to receive payment as a lump sum, through monthly payments or as a line of credit.
Although a reverse mortgage doesn’t require the borrower to make monthly loan repayments, homeowners must continue to pay costs related to their home, such as:
- Property taxes
- Maintenance and upkeep
- Homeowners insurance
- HOA fees
Many lenders also require borrowers to keep their house and property in good condition, as defined in the reverse mortgage's contract. If you fail to meet these requirements, your lender may consider you in default and your loan may come due immediately. Otherwise, the loan won’t need to be repaid until the last surviving borrower sells the home, dies or no longer uses the home as their principal residence. Some lenders may permit a non-borrowing spouse to remain in the home if the borrower dies or moves to a residential care facility.
Mutual of Omaha Reverse Mortgages
In addition to their Home Equity Conversion Mortgage, which is a standard reverse mortgage program backed by the Federal Housing Commission, Mutual of Omaha offers two types of specialty reverse mortgages: the Home Equity Conversion Mortgage for Purchase and the HomeSafe reverse mortgage.
Home Equity Conversion Mortgage for Purchase
Mutual of Omaha’s HECM for Purchase loan lets seniors eliminate monthly mortgage payments on their current home, and funds may be used toward the purchase of a new residence. Although borrowers may opt to make monthly repayments, the loan doesn’t officially come due until the home is sold, the borrower moves or the contractual loan requirements aren’t met. Mutual of Omaha’s HECM loan is insured by the Federal Housing Commission, so the borrower is protected from owing more than the house is worth throughout the life of the loan.
HomeSafe Reverse Mortgage
Because HomeSafe reverse mortgages are designed for homes valued at $850,000 or more and condos valued at $500,000 or more, they’re ideal for borrowers who need more equity out of their home. Loan limits are as high as $4 million with competitive fixed interest rates, and borrowers can take the proceeds as a lump sum or opt to receive monthly payments over a 12- to 60-month term.
Who Qualifies for a Mutual of Omaha Reverse Mortgage?
You may qualify for a Mutual of Omaha reverse mortgage if:
- You’re at least 62 years old
- You own your home
- You have no delinquent federal debt
- The property in question is your primary residence
- Your mortgage is paid off or has only a small balance remaining
- Your home meets the loan’s property standards
What Are the Benefits of a Mutual of Omaha Reverse Mortgage?
Reverse mortgages can benefit older adults by providing the cash they need to live more comfortably during their retirement years without having to move to a more affordable home. Funds may be ideal for:
- Supplementing a fixed income
- Making home repairs or renovations
- Funding a new, more affordable home
- Paying off medical bills and other outstanding debt
Additionally, because the IRS categorizes funds from reverse mortgages as loan proceeds, this money is typically non-taxable.
What Is the Downside of Getting a Reverse Mortgage?
Although there are numerous benefits to taking out a reverse mortgage, these loans also have a downside. Potential borrowers should be sure to consider the possible disadvantages that may come with this type of loan, including:
- Reduced home equity
- Constantly rising loan balances due to monthly interest and fees
- Additional costs, such as origination and closing fees
Additionally, income from a reverse mortgage can sometimes violate asset restrictions for Medicaid and Supplemental Security Income programs, preventing borrowers from obtaining essential medical coverage and other benefits.
Can a Mutual of Omaha Reverse Mortgage Be Refinanced?
Yes. If housing market conditions are favorable and the reverse-mortgaged home has increased in value, it may benefit borrowers to refinance, letting them access additional funds.
You may qualify for reverse mortgage refinancing if:
- You’re at least 62 years old
- Your house has qualifying equity
- Your home is still your primary residence
What Should You Consider Before Taking Out a Reverse Mortgage?
Whether you apply for a loan through Mutual of Omaha or another reputable lender, reverse mortgages can be complicated. Life changes, such as a marriage or a move to a residential care facility, can affect your loan’s status, and reverse mortgages can’t eliminate the possibility of a foreclosure under certain circumstances.
To better understand the available options and how a reverse mortgage may affect their overall financial health, individuals who are considering a loan may want to seek guidance from a reputable financial advisor or an elder law attorney. Seniors who can’t afford to pay for financial advice may find help available at local pro bono law clinics. Reverse mortgage calculators are also available on Mutual of Omaha's website to help interested consumers estimate their potential borrowing power.