What is a reverse mortgage loan?
A reverse mortgage is a loan that allows a homeowner 62 or older to convert a part of their home equity into cash or a line of credit. Some loans also let homeowners finance a new home purchase also called a HECM for purchase. With a reverse mortgage loan, you make no loan payments and payment of taxes and insurance are required you continue to live in the comfort of your home.
Unlike a traditional home equity loan or home equity line of credit (HELOC), you don’t have to repay a reverse mortgage until the home is sold** or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home. The homeowners must maintain the condition of the home and stay current with property taxes and hazard insurance.
Am I eligible?
To be eligible for a reverse mortgage loan, you must meet the following criteria:
- You must be age 62 or older.
- The home must be the borrowers’ primary residence.
- The home must meet Federal Housing Authority (FHA) minimum property standards and flood requirements.
- The home must be one of the following property types: single-family home; a two- to four-unit home with one unit occupied by the borrower; or a HUD-approved condominium.
Will the bank own my home?
No. Just like a forward or regular mortgage, as long as you continue to meet the loan terms, such as staying current on property taxes, homeowners insurance, and property charges, you retain full ownership. You can sell the home at any time.
How much money can I get?
You may receive a portion of your home equity. How much depends on a number of factors, including the age of the youngest borrower or non-borrowing spouse, your home value, the amount of equity, FHA lending limits, the current interest rate, and the reverse mortgage product and payment option you choose.
How do I receive the proceeds?
You can take your funds as a:
- Lump sum
- Line of credit
- Monthly payments
- You can also use a combination of these options
Am I spending my children’s inheritance?
A reverse mortgage loan may help you maintain a quality standard in your retirement years. Because a reverse mortgage loan is a tough decision that may affect other family members, we support you to include them in your decision making process.
When the home is sold or is no longer your primary residence, it’s time to repay the loan. After the loan is paid off, any remaining equity belongs to you or your estate and can be transferred to heirs.
What are the costs connected with a reverse mortgage loan?
Up-front costs may include a property appraisal fee, origination fee, closing costs, mortgage insurance premium, a modest charge for HECM counseling (if applicable), and a servicing fee. You can roll most of the up-front costs into the loan to minimize out-of-pocket expenses. While closing costs vary based upon the type and size of the loan, they’re similar to those for any traditional mortgage. During the life of the loan, interest and a monthly insurance premium accrue. A Reverse-e-Mortgage Specialist will give you a detailed breakdown of the up-front costs and loan expenses.
When do I have to pay back the loan?
You do not have to make principal and interest payments as long as the home remains your primary residence. As long as you meet the loan terms, you do not have to repay a reverse mortgage until the home is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home as their primary residence.
Will this affect my Social Security or Medicare?
Reverse mortgages typically don’t impact regular Social Security or Medicare benefits. But because programs vary from state to state, be sure to consult a benefits professional before entering into a reverse mortgage.