A reverse mortgage is a loan that allows you to convert a portion of the equity you’ve built up in your home to cash, credit line, pay off existing mortgage debt or create a line of credit.  A reverse mortgage can also be used to purchase a home without having to make any mortgage payments. (watch a video explain this)

No, you will still be the sole owner of your home. The bank will not own your home when you take out a reverse mortgage.  This is like any other mortgage as it only creates a lien on the property and does not transfer ownership.

Americans are living longer than ever and many are not prepared for the costs that come along with living longer. If you are 62 or older and have sufficient equity in your home, you can convert the equity into funds to use to pay for anything from long-term care costs or debt to home renovations to make aging in place more accessible.

Yes, the home equity conversion mortgage (HECM) reverse mortgage is insured by the FHA – Federal Housing Administration.  Like any other financial product, it is important that you understand the product for your unique situation. That is why we offer assistance in understanding a reverse mortgage so that you or your family members can make the right and informed decision.

To qualify for a reverse mortgage, you must be 62 or older, have no mortgage balance or have a mortgage balance that can be paid off with proceeds from the loan.  In the case of a purchase reverse mortgage, you must have sufficient down payment to meet the equity requirements for your age. You must live in the home as your primary residence. You must go through a financial assessment that helps determine you are financially stable enough to pay for property charges like taxes. Additionally, you must complete reverse mortgage counseling from a HECM counselor before you are approved for the loan.

You must live in either a single-family home or a two to four-unit home, one unit of which you are living in. There are some circumstances where the Department of Housing and Urban Development (HUD) will approve some condominiums and manufactured homes for a reverse mortgage, if they meet FHA requirements.  Call us to find out more.

The amount you will receive from a reverse mortgage loan will depend on the age of the youngest borrower or eligible non-borrowing spouse, current interest rates as well as the appraised value of the home. The amount is capped at the HECM FHA mortgage limit of $636,150 as of January 1, 2017. Previously, the lending limit was capped at $625,500.

When the loan becomes due and payable, you or your heirs will have the option of selling the home or giving the property back to the bank.  If there is equity it is best for the property to be sold. If the balance of the loan is more than the value of the house, then it can be given back to the bank with no recourse to you or your heirs.

There are several payment options: lump sum, term or tenure payments, or a line of credit. The options can also be combined under some circumstances.

A home equity line of credit (HELOC) can be frozen or changed at the lender’s discretion, but if you have an adjustable-rate HECM and choose the line of credit option, you will never have that taken away as long as you adhere to the terms of the loan.

If you do not adhere to the loan terms, such as keeping up with taxes on your home, insurance, if you let the house fall into disrepair or none of the original borrowers occupy the property as their primary residence, the loan can go into default and potentially become due and payable.

The loan becomes due and payable when all of the homeowners have passed away or have permanently moved out of the property.  Other situations where the loan would become due and payable include if you are not keeping up on insurance, taxes or other home payments.

If the loan becomes due and payable but the proceeds of the home sale do not cover the loan amount, which could be the case if your home depreciates in value, the government insurance would kick in and cover the difference. You nor your heirs would be responsible for paying back more than the home is worth at the time of sale.  At that time the bank should be immediately contacted and advised of the current status.

There are no monthly mortgage payments because instead of making monthly payments that cover interest, all interest is added to the loan balance.  Any existing mortgage balance is paid off at closing using the proceeds from the sale of the home. Or, in the case of the loan balance being more than the value of the home, the property is given back to the bank and the loan is considered paid off.

No.  The funds can be used without restriction.  However there is one restriction. In some cases the borrower may be required to set aside funds for taxes and insurance.

The estate does inherit the home, but there will be a lien on the title. If your heirs wish to retain the property, then the full amount of the loan must be paid regardless of property value. The amount due at loan maturity is the principal borrowed plus any accrued interest and mortgage insurance premium.

For example, if someone with a $250,000 home passes away and leaves a reverse mortgage loan balance of $80,000, then the estate would sell the home for $250,000, repay $80,000 to the bank, and keep the $170,000 difference.

As a non-recourse loan, lenders can only look to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value.  You or your heirs will not be required to pay more than the value of your home at the time the loan is repaid; even if your loan balance exceeds the value of your home provided you or your heirs decide to sell the home.