Simplifying reverse mortgages
What is a reverse mortgage?
A reverse mortgage is a federally-insured home loan that allows homeowners 62 and over to turn a portion of their home's equity into tax-free cash. No mortgage payments are due during the life of the loan.
How do I receive the money?
You can choose to receive the proceeds from a reverse mortgage in several ways: as a lump sum, fixed monthly payments for as long as you reside in the home, a line of credit, or as a combination of the three options.
When does the loan have to be paid back?
The loan is not due until the last borrower sells the home, passes away, or permanently moves out. Other cases when the loan would have to be paid are failure to live in the home for 12 consecutive months or to pay property taxes/insurance.
Is it possible to lose my home?
No, it is not. You retain ownership of the property and the house remains in your name until the last surviving member on the loan passes away, in which case your heirs gain ownership.
Does my credit score or income affect my qualification?
No, there are no credit or income requirements for qualification.
What are the FHA property guidelines for a reverse mortgage?
Eligible homes include: single and multi-family homes, condominiums, planned unit developments, modular homes, and manufactured homes
Are reverse mortgages safe?
People can be wary of reverse mortgages, but they are FHA-approved and completely safe. There is a great deal of protection built into this program for borrowers. You make no mortgage payments, and you never owe more than your home's value.
How will this affect my children and their inheritance?
Your children (provided they are your heirs) have the choice of refinancing and keeping the home, or selling in order to pay off the loan.
Are there different types of reverse mortgage programs available?
Yes. There are various programs with both fixed and adjustable interest rates. The most popular is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration, a branch of the U.S. Department of Housing and Urban Development (HUD).
What are the fees associated?
Closing costs and fees are part of reverse mortgages, as with any mortgage program. This includes title insurance, an origination fee, and recording fees. They are typically included in your loan, however, and do not have to be paid upfront.
Is there a limit on what I can use the money for?
No, there is no limit. Borrowers can use the funds any way they wishfor home repairs and improvements, healthcare expenses, in-home care, education, and supplemental retirement income.
Simplifying reverse mortgages
By: Josh Shein
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