Reverse Mortgage for Seniors
You’ve worked hard for your home, now let your home work hard for you.
If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may participate in FHA’s Home Equity Conversion Mortgage (HECM) program. The HECM is FHA’s reverse mortgage program that enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both.
You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
How the Program Works
There are many factors to consider before deciding whether a Reverse Mortgage is right for you. To aid in this process, you must meet with a government approved Reverse Mortgage counselor to discuss program eligibility requirements, financial implications and alternatives to obtaining a Reverse Mortgage and repaying the loan. Counselors will also discuss provisions for the mortgage becoming due and payable. Upon the completion of the Reverse Mortgage counseling, you should be able to make an independent, informed decision of whether this product will meet your specific needs. To find a Reverse Mortgage counselor please call (866) 654-9300 toll-free.
There are borrower and property eligibility requirements that must be met. If you meet the eligibility criteria, we will have you complete a reverse mortgage application, arrange for you to get a counselor. We will discuss other requirements of the Reverse Mortgage program, the loan approval process, and repayment terms.
- Be 62 years of age or older
- Own the property outright or paid-down a considerable amount
- Occupy the property as your principal residence
- Not be delinquent on any federal debt
- Participate in a consumer information session given by a HUD- approved HECM counselor
The following eligible property types must meet all FHA property standards and flood requirements:
- Single family home or 2-4 unit home with one unit occupied by the borrower
- HUD-approved condominium project
- Manufactured home that meets FHA requirements
Income, assets, monthly living expenses, and credit history may be verified. Timely payment of real estate taxes, hazard and flood insurance premiums may be verified.
Five Payment Plans to Choose From
- 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 in installments, at times and in an amount of your choosing until the line of credit is exhausted.
- Modified Tenure – combination of line of credit and scheduled 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.
You can change your payment plan option for a fee of $20.
Mortgage Amount Based On
The amount you may borrower will depend on:
- Age of the youngest borrower
- Current interest rate
- Lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price; and
- Initial Mortgage Insurance Premium–your choices are HECM Standard or HECM SAVER
You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.
The HECM loan includes several fees and charges, which includes: 1) mortgage insurance premiums (initial and annual) 2) third party charges 3) origination fee 4) interest and 5) servicing fees. We can discuss which fees and charges are mandatory.
Frequently Asked Questions
Q: Can I lose my home?
A: No you cannot lose your home. You remain the owner of your home and can stay as long as you wish. As the homeowner, you must continue to pay home insurance, property taxes and continue with basic home maintenance during the loan period – that’s it. When the home is sold, the loan is repaid (including accrued interest and any fees) and any remaining equity goes to you or your heirs.
Q: How much can I borrow?
A: 3 factors are considered to calculate how much equity you can access:
- Age of the youngest borrower
- Home value
- Current interest rates
Although we use the home value you initially provide us to calculate the preliminary loan amount, an independent appraiser must visit your home to ascertain its actual value. We then re-calculate the loan amount according to this official home value. All this will be organized by your reverse mortgage professional. They can also answer any questions or concerns you may have.
Q: What if I have a mortgage already?
A: That’s absolutely fine. If you qualify, a reverse mortgage will first pay off your existing mortgage and then give you the remaining proceeds. In fact, many of our borrowers use a reverse mortgage for that purpose – to eliminate monthly payments on their traditional mortgage.
Q: Are there any income/credit score requirements?
A: No – because you don’t make any monthly payments, proof of your income and credit score are NOT required. A credit report will only be used to check any federal tax liens or other items that may affect qualification.
Q: Will my children lose their inheritance?
A: The loan is repaid once the last remaining borrower moves out of the home. Normally, the home is sold, the loan (including interest and any fees) is repaid, and any remaining equity goes to you or your heirs. If your children choose to keep the home, they can pay the loan back by using such financial tools as refinancing the reverse mortgage. If they choose to sell the home, they are provided up to 12 months to complete the sale.
Q: Do I have to make monthly payments?
A: No – there are never any monthly mortgage payments. However, payment of taxes, insurance and general upkeep of the home are the responsibilities of the homeowner. The loan becomes due when the youngest borrower permanently moves out of the home.