A reverse mortgage is a loan available to seniors over the age of 62 which allows them to convert equity in their home into cash. These loans were created to give seniors access to cash for expenses such as home improvements, unexpected medical costs, and in-home care by utilizing the accumulated equity in their homes.
This type of loan is called a reverse mortgage because instead of the borrower making monthly payments to their lender as they would with a traditional mortgage, the lender makes payments to the borrower. Unlike a traditional home equity loan or second mortgage, a reverse mortgage does not have to be repaid until the borrower no longer occupies the home as their primary residence.
The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM) which is insured by the FHA. An alternative option is the Proprietary Reverse Mortgage which is not backed by the federal government.
Is a Home Equity Conversion Mortgage (HECM) right for you?
If you are 62 years or older, have equity in your home, and are looking for a way to enhance your current or future retirement, the answer may be yes.
- Convert a portion of the equity in your home into tax free income to use for whatever financial purpose you want.
- Monthly mortgage payments are not required and repayment is deferred until the last borrower has left the home.
- A government insured Home Equity Conversion Mortgage (HECM) is also non-recourse, meaning that the loan payoff will never be more than your home is worth at the time repayment is required.
- A HECM loan can create a line of credit that may increase over time regardless of your home’s value.
- Continue to own the home.
- A reverse mortgage can also be used for the purchase of a home.
Additional requirements include that one occupy the property as their primary residence, pay all required property taxes, insurance and any required home owner association dues as well as maintain the property to HUD standards.
This is not a commitment to lend or extend credit. All loans are subject to credit approval including credit worthiness, insurability, and ability to provide acceptable collateral. Not all loans or products are available in all states or counties. A reverse mortgage is a loan that must be repaid when the home is no longer the primary residence, is sold, or if the property taxes or insurance are not paid. This loan is not a government benefit. Borrower(s) must be 62 or older. The home must be maintained to meet FHA Standards, and you must continue to pay property taxes, insurance and property related fees or you will lose your home.
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Frequently Asked Questions
Am I Eligible?
All titleholders must be 62 or older and own the home as their primary residence. The home must meet Federal Housing Authority (FHA) minimum property standards. You must have sufficient home equity. A BOE Reverse Loan Specialist can tell you if you have enough home equity to qualify.
Will the Bank Own My House?
No. Just like a traditional mortgage, as long as the terms of the loan are met, the borrowers retain full homeownership and can sell the home at any time.
How Much Money Can I Get?
The is determined by the age of the youngest borrower (or eligible Non-Borrowing Spouse), you home’s value, FHA lending limits, the amount of equity, and the current interest rate as well as which reverse mortgage product and payment option you choose. A BOE Reverse Loan Specialist can provide you with a quote that is tailored to your specific situation, with no cost or obligation.
How Do I Receive My Proceeds?
You can take your funds as monthly payments for a specified period of time, a lump sum, or a line of credit available for as long as you live in the home. A combination of these options can be arranged.
Is the Reverse Mortgage Insured?
The HECM (reverse mortgage) is insured by the Federal Housing Administration (FHA) to protect lenders and borrowers alike. This insurance guarantees you will receive your loan proceeds as agreed upon with the lender at the closing of the loan.
What are the Costs Associated With a Reverse Mortgage?
In addition to interest, the costs include a title fee, real estate settlement closing costs, credit report fee, a property appraisal fee, origination fee, closing costs, mortgage insurance premium, servicing fee and a modest charge for HECM counseling. While closing costs do vary based on the type and size of the loan, they’re the same as those for any traditional mortgage. You can roll most of the up-front costs into the loan, so out-of-pocket expense can be minimized. We will be pleased to give you detailed breakdown of the costs.
What if your loan amount ends up being more than the value of the home? Who will be responsible for the loan?
Reverse mortgages are non-recourse loans. This means that if somehow your loan balance ends up surpassing the value of your home, the lender cannot collect more than the value of the home at maturity. Under the HECM program, the difference between the loan balance and the home value is covered by the Federal Housing Administration’s insurance fund.
Will a reverse mortgage loan affect your Social Security, Medicare or pension benefits?
No, these benefits will not be impacted. Reverse mortgage loan funds are considered loan proceeds and not income. As an added benefit, the longer you wait to access Social Security benefits, the more you may receive each month. A reverse mortgage can help delay accessing Social Security and may boost your lifetime retirement income. In some cases, Medicaid and other need-based benefits may possibly be affected.