What is a Reverse Mortgage?
Since their inception in 1988, Reverse Mortgage loans can turn your home’s equity into cash to help pay monthly living expenses during retirement. Also known as a HECM, or Home Equity Conversion Mortgage, enables a homeowner, age 62 or older, to access the equity in their home without having to sell the home, refinance or even give up the title.
The reverse mortgage is insured by the Federal Housing Administration or FHA and has helped thousands of homeowners safely access their equity. With a HECM Mortgage you:
- You will never lose the title to your home
- Also, you will never make mortgage payments as long as you occupy the residence
- Never owe more than the home is worth
- Never have to move
To be eligible for a Reverse Mortgage:
- you must be 62 or older
- the home must be your primary residence
- you must have enough equity to pay off existing liens
- the property must be a single-family home, condo, townhouse, or 2-4 unit owner-occupied home
- you must take a HUD-approved counseling course
- you must continue to pay property taxes and homeowners insurance
What are the risks associated with Reverse Mortgages?
- not putting both spouses on the HECM loan deed. Often times the younger spouse may be left off in order to boost the payout amount, but when the elder spouse dies it is the responsibility of the younger spouse to pay off the loan. Remember, the only person that is guaranteed to stay in the home is the named borrowers, not spouses or family members.
- dishonest lenders and mortgage brokers can push elder homeowners into loans they can’t afford.
- Getting a HECM mortgage because you simply can not afford the mortgage payment. Borrowers must pay real estate taxes and homeowners insurance and those items can increase each year. Sometimes it’s just better to sell.
- contrary to popular belief you can lose your home with a HECM Reverse loan. Borrowers must pay utilities, homeowners insurance, and real estate taxes. If you don’t lenders can take action, including foreclosure.
- taking the lump sum option. Taking the lump sum option makes it easier to use up all the money and find yourself unable to handle the costs of keeping up the home
Please give us a call at to answer any specific questions regarding your reverse mortgage options.
Common Questions About A Reverse Mortgage
Is a Reverse Mortgage Safe?
A Reverse Mortgage is known by its formal name as a HECM Mortgage. A HECM Mortgage is insured by the federal government, specifically the
Federal Housing Administration or FHA, has been around since 1988 and has helped thousands of homeowners.
Can I buy a home with a Reverse Mortgage?
Yes! You can absolutely purchase a home with a reverse mortgage, utilizing what is called a HECM for Purchase.
What are the basic requirements for a Reverse Mortgage?
In order to qualify for a Home Equity Conversion Mortgage, the homeowner must be 62 or older. The home must be your primary residence and meet HUD minimum property standards.
How is a reverse mortgage different from other home loans?
There are many different ways to access cash from your homes such as conventional cash-out refinance, a second mortgage, or home equity line or loan. All these “conventional” ways require monthly repayments of principal and/or interest. With a Home Equity Conversion Mortgage, you do not need to make monthly mortgage payments as long as you remain in the home. The loan is only repaid if you leave the home.
How can I use the proceeds from my Reverse Mortgage?
There are no restrictions as to how you must use your proceeds from your reverse mortgage. Common uses range from monthly living expenses, healthcare, estate planning, or paying college costs for children or grandchildren.