A reverse mortgage is a home loan designed for eligible homeowners age 55 and older (62+ for the Home Equity Conversion Mortgage, or HECM, program). It allows you to convert a portion of the equity in your primary residence into usable funds.
Depending on the program you choose, loan proceeds may be received as a lump sum, fixed monthly payments, a line of credit, or a combination of these options.
No monthly mortgage payments are required as long as you continue to live in the home as your principal residence and meet all loan obligations, including payment of property taxes, homeowners insurance, and maintaining the property in good condition. The loan becomes due and payable when the last remaining borrower permanently leaves the home, sells the property, or no longer meets the loan requirements. Any remaining equity after the loan is repaid belongs to you or your estate.
Federally insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs), are insured by the Federal Housing Administration (FHA). Reverse mortgage products offered by private lenders are also available and are not government insured.
A reverse mortgage is easy to obtain, provided that:
Absolutely. You retain full ownership of your home when you obtain a reverse mortgage. As with any mortgage, the lender has a lien against your property. Since you make no monthly payments, the loan balance increases across time. When the loan is repaid the borrower or their heirs pay off the loan balance, which consists of the financed closing costs, the cash advanced from the reverse mortgage and the interest that has accrued. The remaining equity stays with the homeowner or their heirs.
You can use the money you receive from your reverse mortgage in any way you choose:
The possibilities are endless ...
With a reverse mortgage, you have five payment plan options to choose from:
You can change payment plans as frequently as you wish for a very small fee.
The amount of money you can receive from a reverse mortgage is determined by your home value, the age of the homeowner(s) and the current interest rate. Lisa will assist you in evaluating your options and calculate the maximum amount of money that will be available to you
The interest on a reverse mortgage is adjustable and is tied to readily available market indexes. The initial rate is determined at loan closing and adjusts either monthly or annually. Interest charges do not affect the monthly payments that you receive and you are only charged interest on your loan balance, which consists of the cash you have received and the financed closing costs. Fixed rates are also available.
As with a regular mortgage loan, there are closing costs involved with a reverse mortgage as well. The majority of the fees can be financed into the loan. The fees typically include the cost of the appraisal, title insurance, loan origination, escrow and recording fees.
Lisa will provide you a good faith estimate of the costs involved.
The reverse mortgage becomes due and payable when the borrower(s) permanently leaves the home; whether they move, sell or pass away. Reverse mortgages are typically repaid from the proceeds of the sale of the home, with any remaining equity staying with the homeowner or their heirs. If a spouse passes away, the eligible surviving spouse continues to receive the full benefits of the reverse mortgage, with no repayment until they decide to permanently leave the home.
No. Reverse mortgages are a non-recourse loan therefore your heirs cannot be liable for repaying the mortgage. Because the reverse mortgage is Federally insured, you and your heirs are protected from ever owing more than what the house could be sold for any time in the future even if the property values depreciate.
Before applying for a reverse mortgage you are required to meet with an independent reverse mortgage counselor. This counseling session will help you determine whether a reverse mortgage is right for you. The counseling session can be done either in person or on the telephone, and family or trusted friends are encouraged to participate. At the end of the meeting you will receive a Certificate of Borrower Counseling.
For a list of counselors in your area, please call Lisa at (231) 218-0307.
