Illinois Reverse Mortgage Act
Last year in August Governor of Illinois, Bruce Rauner (Republican) signed into law Senate Bill 1440 which is known as the Reverse Mortgage Act. This bill came into effect on January 1, 2016 and according to this new Illinois reverse mortgage Act there will be a “three-day cooling off period” during which a borrower is not required to close on or proceed with a loan.
Accordingly, before signing a reverse mortgage agreement or any type of real estate or mortgage contracts in Illinois homeowners should have these contracts reviewed by an Illinois real estate attorney. This attorney in turn will ensure that the contract is fair and complies with all applicable laws, including the Illinois Reverse Mortgage Act.
Before we proceed further we need to understand what a Reverse Mortgage is. Well, a reverse mortgage enables older home owners to cash into the equity of their home. In case of traditional mortgages homeowners are required to make periodic (monthly, in most cases) loan payments to their lender. In the case of a reverse mortgage, the homeowner instead receives a monthly payment, lump sum or line credit that is often tax free. So, when the homeowner has to move out of the house, sell the house or if they pass, then the borrower, his or her spouse, or his or her estate has to repay the loan. To qualify for a reverse mortgage Homeowners must be at least 62 years old.
So when someone gets a reverse mortgage of any kind, one is getting a loan against the equity in their home. While the borrower gets to keep the title to their home, but instead of paying monthly mortgage payments, one gets an advance on part of the homes equity. The money you get usually is not taxable, and it generally won’t affect the Social Security or Medicare benefits. This loan has to be repaid, when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence.