THE THREE BASICS OF REVERSE MORTGAGES
Most, but not all, reverse mortgages today are federally insured through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) Program. This advertisement talks about HECM loans only.
1. Tax Free Money from Your Home Equity:
A reverse mortgage can be used to turn a portion of the equity in your home into cash that can be used for many different purposes that may enhance and extend your retirement. If you currently have a mortgage, a reverse mortgage could eliminate your mortgage payment (taxes and insurance must still be paid, and the home maintained), and also allow you to access any additional equity (over and above your mortgage balance), to create accessible cash which is not readily available while in the form of home equity. You have spent many years putting your money into your home equity, and now with a reverse mortgage, you may be able to convert some of that equity into tax-free cash.
2. Never a Mortgage Payment During the Life of the Loan:
A reverse mortgage is the only type of mortgage that never requires a payment of principal and interest until the last surviving borrower passes away or moves out of the home, as long as all loan terms are met. You are always required to pay household expenses such taxes and insurance, and maintain your home, but whether you take the reverse mortgage as a line of credit, monthly draws or a lump sum, you will never be required to make a payment during your lifetime as long as you live in your home and meet all other loan terms. You always have the option to make a payment if you wish. If you choose to make a payment toward your line of credit, the money may increase your available funds in your line of credit.
3. Never Owe More Than What the Home is Worth**:
When you permanently move out of the home, whether you sell it or pass away, neither you, your estate nor your heirs are responsible to pay the deficit if the balance owed on your reverse mortgage exceeds the home value. However, should your heirs want to keep your home, they may purchase it for 95% of the current appraised value.
Reverse Mortgage Loans AT A GLANCE
What is a HECM Reverse Mortgage Loan?
A HECM reverse mortgage is a way to turn a portion of the equity in your home into cash. The proceeds from a reverse mortgage can be used to pay for unexpected expenses, such as nursing home costs or long-term care. It could also provide you with additional cash flow for all the expenses you have. As long as all loan terms are met, the loan does not require repayment until the last surviving borrower permanently moves out of the home, or passes away.
- Borrower(s) must be 62 years or older
- Must be homeowner and either own home outright or have significant equity; must live in home as primary
residence (live there 6+ months per year)
- Property must be a single-family home, 2- to 4-unit dwelling or FHA-approved condo
- Must meet minimal credit and property requirements
- Must receive reverse mortgage counseling from a HUD-approved counseling agency
- Must not be delinquent on any federal debt
- Keep the title to their home
- Tax-free cash from equity 30-74%*
- As long as all loan terms are met, mortgage payments are optional; however, payment of taxes and insurance are
required, and the home must be maintained. Borrower must also live in the home as their primary residence.
- Does NOT require repayment until last living borrower permanently leaves the home or loan terms are not met
- Borrower may choose to sell the property, if they so wish
- Never owe more than home value with HECM reverse mortgage loan**
- Can purchase a home for 30-70% down***
- Generally will not affect Social Security & Medicare*
- Access a growing line of credit (applies to unused funds)