What is a Reverse Mortgage loan?

A Reverse Mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a financial product available to homeowners who are 62 years of age or older.  It allows them to convert a portion of their home’s equity into cash without selling the property or making monthly mortgage payments.  

Who is eligible for a Reverse Mortgage?

To qualify for a Reverse Mortgage loan, you must be a homeowner and meet the minimum age requirement (62 or older).  You must also have sufficient equity in your home.

How much can you borrow with a Reverse Mortgage?

The amount of equity you can access with a Reverse Mortgage loan depends on factors such as your age, the appraised value of your home, current interest rates, and the specific program you choose.  Generally, the older you are, the more equity you have access to.

What are the monthly mortgage payments?

With a Reverse Mortgage, you are not required to make monthly mortgage payments like a traditional conventional mortgage.  Instead, the loan is repaid when you sell the home, move out or pass away.  At that time, the loan balance, along with accumulated interest and fees, become due.

Do I still have to pay property taxes, homeowner’s insurance and association maintenance fees?

Yes, it is the homeowner’s responsibility to continue paying for their property taxes, insurance, and association maintenance fees (for condos).  Failure to meet these obligations could result in defaulting on the loan.  In some cases, the Reverse Mortgage Servicer will set up a separate escrow account to pay for property taxes and homeowner’s insurance.  This is something determined once you have applied for a Reverse Mortgage loan.

How long before the loan becomes due?

Once the last surviving borrower is no longer living in the home or passes away the loan will become due. Heirs have six months to pay off the loan balance.  If more time is needed, notify the lender and an extension of an additional six months may be granted. However, remember, mortgage interest continues to accrue on the loan so it’s in the heirs best interest to decide what they want to do as soon as possible.

Can the subject property be held in trust?

Yes, you can hold title to your home in a trust.  This is no different from any other traditional mortgage.

Can you receive cash from a Reverse Mortgage?

Yes, there are different ways to receive cash from a Reverse Mortgage loan.  You might choose a lump sum payment, regular monthly installments, a line of credit, or a combination of these options.  The choice will depend on your financial needs and preferences.

What if I owe more than what my home is worth?

Reverse Mortgage loans have a non-recourse feature which means that you or your heirs are not personally liable for repaying more than the appraised value of the home when the loan becomes due. If the loan balance exceeds the home’s value, the lender absorbs the loss, and neither you nor your heirs will have to pay the difference.

Can you buy a house with a Reverse Mortgage?

Yes!  A HECM (Home Equity Conversion Mortgage) Reverse Mortgage for Purchase is available for qualified borrowers.  The process is similar to a forward mortgage where borrowers work with a licensed Real Estate Agent and incur closing costs.  This product is ideal for Senior homeowners who may be looking to “right-size” to a home that is a better fit for their lifestyles or who may want to relocate to be closer to family members.  A Reverse Mortgage for Purchase can be a great solution for those wanting to accomplish their retirement relocation goals!