What is a reverse mortgage?

A reverse mortgage is a financial product designed for homeowners aged 62 or older who have significant home equity. It allows them to borrow against the value of their home while retaining ownership. Unlike a traditional mortgage, where borrowers make monthly payments to the lender, a reverse mortgage does not require immediate repayment. Instead, the loan is repaid when the homeowner sells the property, moves out permanently, or passes away. This type of mortgage provides retirees with a way to access their home equity and supplement their income during retirement.

How do I receive funds with a reverse mortgage?

When you have a reverse mortgage, there are different options for receiving the funds. One option is to receive the money as a lump sum, providing you with a substantial amount upfront. Another option is to receive fixed monthly payments, which can provide a steady income stream. Lastly, you can choose to have a line of credit, allowing you to access funds whenever needed. The choice depends on your financial goals and preferences.

What happens if the amount borrowed exceeds the value of my house?

The federal government strictly regulates reverse mortgages to prevent borrowers from owing more than their home's value. However, it is still possible for the loan balance to surpass the home value if the property decreases significantly in value or if the borrower lives longer than expected. In such cases, the borrower or their estate will not be held responsible for paying any amount beyond the appraised value of the home. This is known as a non-recourse feature, which provides protection to the borrower or their estate.

What are some downsides of a reverse mortgage?

While reverse mortgages can be beneficial for many retirees, there are potential downsides to consider. Firstly, if someone else, such as a family member or friend, is living with you in the home, they may have to find alternative housing after you pass away, as the home will need to be sold to repay the loan. Secondly, some individuals may prefer to preserve their equity for other purposes, such as leaving an inheritance for their heirs. Additionally, if you need to move into a nursing home or assisted living facility for more than a year, you would typically need to sell the home to repay the loan. Lastly, it's important to be aware of scams targeting seniors related to reverse mortgages, and exercise caution when exploring these financial options.

Can a reverse mortgage be refinanced?

Yes, it is possible to refinance a reverse mortgage. Refinancing involves replacing an existing reverse mortgage with a new one, often with better terms, lower interest rates, or increased benefits. Refinancing may be a viable option if interest rates have dropped significantly, as it allows borrowers to access more equity from their home. It can also be considered if you wish to add your spouse to the loan or if your home's value has increased, providing you with additional borrowing capacity or more favorable terms.

When should I consider refinancing a reverse mortgage?

Refinancing a reverse mortgage can be considered under various circumstances. If interest rates have significantly dropped, refinancing can enable you to access more equity from your home since borrowing money becomes more affordable. Another scenario is if you want to add your spouse to the loan, which can provide them with continued financial security in case of your passing. Additionally, if you are older and meet the necessary criteria, refinancing may allow you to borrow a higher percentage of your home's value, offering you more financial flexibility. Lastly, if the value of your home has risen, refinancing can provide you with additional borrowing capacity or access to more favorable terms.

How can I determine if refinancing my reverse mortgage is a suitable option?

To determine if refinancing your reverse mortgage is a suitable option, it is recommended to consult with a New Jersey real estate lawyer or a financial advisor with expertise in reverse mortgages. They can evaluate your individual circumstances, review your current mortgage terms, assess the potential benefits of refinancing, and guide you through the process. Their expertise will ensure that you make an informed decision based on your specific financial goals and needs.

How can an attorney with a real estate and estate planning background help with a reverse mortgage?

An attorney with a strong background in both real estate and estate planning can provide valuable assistance when considering a reverse mortgage. They can review your unique situation, explain the legal implications, and help you navigate the complex financial and legal aspects involved in obtaining a reverse mortgage. They can also assess the impact on your estate plan, ensuring that your interests are protected and your long-term goals are considered.

What services can The Matus Law Group provide regarding reverse mortgages?

The Matus Law Group can assist you with various aspects related to reverse mortgages. Their experienced New Jersey real estate lawyer can guide you through the reverse mortgage process, provide personalized advice based on your unique situation, and help you make informed decisions. They can review the terms of your existing mortgage, evaluate the potential benefits of refinancing, explain the legal implications, and ensure your interests are protected throughout the process.

How can I contact The Matus Law Group to discuss a reverse mortgage?

To contact The Matus Law Group, you can call us at (732) 785-4453 to schedule a consultation. Our team is ready to assist you with any questions or concerns you may have about reverse mortgages. We look forward to helping you secure your financial future.

Reverse Mortgages Simplified

Published on: March 4, 2025

If you or a loved one are 62 or older and have considerable home equity, it may be wise to consider a reverse mortgage. A reverse mortgage is a loan, but it is not the same as the type of mortgage you get when buying a house — that’s called a forward mortgage. Unlike a forward mortgage, reverse mortgages don’t require you to make any loan payments until one of two things happens: you die or you decide to move away and sell your home. At that time, the money from the sale of your home is used to pay back the loan.

Take control of your financial future and explore the benefits of a reverse mortgage today. At The Matus Law Group, our New Jersey real estate lawyers are here to guide you through the reverse mortgage process and provide advice tailored to your unique situation. We can assist in clarifying and acquiring the potential financial stability and peace of mind that a reverse mortgage can offer. Our team can also provide guidance and support in other relevant matters, such as understanding what title searches can uncover and if a real estate purchase agreement is the same as an offer. Call us today at (732) 785-4453 to schedule a consultation and take the first step toward securing your retirement.

Are Reverse Mortgages Legal in NJ?

Reverse mortgages are legally permitted in New Jersey. These financial tools enable homeowners to convert part of their home equity into cash without the need to sell their home or make monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the home, permanently relocates, or passes away.

In New Jersey, specific regulations ensure that reverse mortgages are used responsibly and protect the interests of older homeowners. One of these regulations is the age requirement: borrowers must be at least 62 years old to be eligible for a reverse mortgage. This age limit is in place to keep these financial products available primarily to older adults who may benefit from accessing their home equity to cover living expenses, healthcare costs, or other needs.

Additionally, New Jersey law mandates that potential borrowers receive counseling from a HUD-approved agency before finalizing a reverse mortgage. This counseling helps homeowners understand the implications of the loan, including how it might affect their estate, eligibility for government programs, and long-term financial planning.

While reverse mortgages can be a valuable tool for many New Jersey residents, it is crucial for potential borrowers to fully understand the terms and conditions. Consulting with a New Jersey real estate lawyer can provide clear insights and assist homeowners in making well-informed decisions.

Who Qualifies for a Reverse Mortgage?

A reverse mortgage allows eligible homeowners to access a portion of their home equity as cash without selling their home or paying additional monthly payments. In New Jersey, understanding who qualifies for this type of financial arrangement is straightforward but requires meeting specific criteria.

Eligibility Requirements

Age Limit: Applicants must be at least 62 years old.
Home Equity: Homeowners should either own their home outright or carry a very low mortgage balance.
Property Type: The property eligible for a reverse mortgage includes:
- Single-family homes
- Two-to-four-unit homes, where one unit must be occupied by the borrower
- Manufactured homes that meet specific standards
- Individual condominium units meeting FHA Single Unit Approval standards
Primary Residence Rule: The home must be the borrower’s primary residence, meaning they live there most of the year.
Financial Requirements: Homeowners must demonstrate the financial capability to maintain their property taxes, homeowner’s insurance, and any homeowners’ association (HOA) fees. Also, they must not have any federal debt delinquencies.

Additional Considerations

HUD-Approved Counseling: Before obtaining a reverse mortgage, potential borrowers are required to attend counseling with a HUD-approved agency. This session is designed to help individuals fully grasp the financial implications of a reverse mortgage, such as how it will affect their estate and financial planning.

Meeting these requirements helps ensure that homeowners are well-prepared to take on a reverse mortgage, supporting their financial needs while allowing them to remain in their homes. For New Jersey residents, adhering to these guidelines is crucial for securing a reverse mortgage that aligns with their long-term living arrangements and financial goals.

How Will I Receive Funds With a Reverse Mortgage?

There are some options! You may be able to receive the funds:

As a lump sum
In fixed monthly payments
As a line of credit.

What Happens If the Amount I Borrow Becomes Greater Than the Value of My House?

The federal government strictly regulates the way reverse mortgages are structured to prevent this from happening. However, it can still sometimes happen if your house decreases significantly in value or if you are receiving monthly payments and you live longer than your lender thought possible. If this happens, you (or your estate) will not be responsible for paying any amount beyond the value of the home.

What Are the Downsides of a Reverse Mortgage?

There are certainly some things to look out for and consider when it comes to reverse mortgages:

If someone, such as a friend or family member, lives with you, they will have to move after you pass away because the home will have to be sold.
Some people prefer to save their equity.
You will have to sell your home if you need to move into a nursing home or other type of assisted living facility for more than a year.
There are many scams targeting seniors using reverse mortgages.

Can You Refinance a Reverse Mortgage?

In New Jersey, it is indeed possible to refinance a reverse mortgage. Refinancing a reverse mortgage involves replacing your current reverse mortgage with a new one that may offer improved terms, lower interest rates, or increased benefits.

Refinancing a reverse mortgage in New Jersey can also be considered under the following circumstances:

If interest rates have dropped significantly, it could enable you to access more equity from your home since the cost of borrowing money has become more affordable.
If you wish to add your spouse to the loan.
If you are older and meet the necessary criteria, you may be eligible to borrow a higher percentage of your home’s value, which can provide you with more financial flexibility.
If the value of your home has risen, it means that you now have additional equity available, which can be beneficial if you’re looking to leverage that equity for various purposes. It may provide you with additional borrowing capacity or access to more favorable terms.

To explore the possibility of refinancing your reverse mortgage in New Jersey, it is recommended that you reach out to a New Jersey real estate lawyer. The Matus Law Group can provide you with the necessary information, guide you through the process, and help determine if refinancing is a suitable option based on your individual circumstances. Don’t hesitate to reach out and schedule a consultation with us today.

Considerations When Refinancing a Reverse Mortgage in New Jersey	Description
Drop in Interest Rates	Refinancing can provide access to more equity due to lower borrowing costs.
Adding Spouse to the Loan	You can refinance to include your spouse as a borrower.
Eligibility for Higher Percentage of Home’s Value	Older individuals meeting the criteria may borrow a higher percentage of their home’s value.
Increase in Home Value	Rising home value offers additional equity, enabling more borrowing capacity and favorable terms.

Who Can Help Me Decide If a Reverse Mortgage Is Right for Me?

Deciding to opt for a reverse mortgage is a significant financial decision that impacts not just your current lifestyle but also your long-term financial health. If you’re considering a reverse mortgage, it’s a great idea to partner with an attorney who has a strong background in both real estate and estate planning. At The Matus Law Group, our experienced New Jersey real estate attorneys are ready to provide the comprehensive legal advice you need to make an informed decision.

Our team can help you explore how a reverse mortgage might fit into your overall financial scenario. We can review your situation, discuss the potential implications of such a decision, and clarify the terms and conditions of a mortgage agreement. Our goal is to assist you in making choices that enhance your financial stability and peace of mind.

Christine Matus