How Does a Reverse Mortgage Work?

Can I qualify for an FHA HECM Reverse Mortgage?

To qualify for an FHA HECM (Home Equity Conversion Mortgage), you must be 62 years old or older, own your home either free and clear, or have a current mortgage balance low enough so that it can be paid off when your Reverse Mortgage closes. Typically you need about 50% equity in your property in order to qualify, but if you aren’t quite at 50%, give us a call and let us see if we can still help you. There are NO income or credit requirements to qualify, like there are with a traditional mortgage. You are required to receive consumer information from an approved HECM counselor prior to obtaining the loan, which can be done over the phone or in person.

Do I have to have a certain type of home?

Yes. Your home must be a single family home or a 1 to 4 unit dwelling. If more than 1 unit, you must live in one of the units. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

What is the difference between a Reverse Mortgage and a home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must qualify for the loan by having sufficient income and assets and you are required to make monthly mortgage payments. The Reverse Mortgage is different in that it pays you, and is available regardless of how much money you make. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Currently, the national FHA mortgage limit for reverse mortgages is $417,000.

You don't make mortgage payments, because the loan is not due to be paid back as long as you live in your home. You still have to pay your property taxes, homeowner’s insurance and other typical payments like utilities. With an FHA HECM, you don’t have to worry about being foreclosed on or forced to vacate your home because you "missed your mortgage payment."

Will payments from a Reverse Mortgage affect my Social Security or Medicare?

No.  Reverse Mortgages are ideal for homeowners who are retired or no longer working and need to supplement their income. The money you receive is nontaxable and does not interfere with Social Security or Medicare benefits.  Even if you are still working, you can still qualify for a Reverse Mortgage. 

Can the lender take my home away if I outlive the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the home and keeps the taxes and insurance current. You can never owe more than the value of your home at the time you or your heirs sell the home. When or if you move out of your house, the maximum amount that you will owe is the current market value of the house, even if the amount you received from your Reverse Mortgage including accrued interest is more than that value. If the amount you received including accrued interest is less than the appraised value, then that is all that you owe. The protection that is provided by the Federal Housing Administration (FHA) can give you peace of mind knowing that you will never owe more than your home is worth.

Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You can use an online calculator like the one on the AARP website to get an idea of what you may be able to borrow.

How do I receive my payments?

You have five options:

• Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home.
• Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

Are you ready to get started on your Reverse Mortgage?

Let our Reverse Mortgage experts guide you through the education process so that you fully understand how it works, how it can change your life, increase your peace of mind, and help you truly enjoy your golden years.

Give us a call today for a no pressure, no obligation consultation.