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If you have been thinking about a reverse mortgage for yourself or a loved one, now may be the time to get started. For many seniors, reverse mortgages make the difference between enjoying a comfortable retirement in their home and being dependent on others or barely getting by.
What's a Reverse Mortgage?
Reverse mortgages allow homeowners aged 62 or older to convert a portion of their home equity into cash without having a monthly mortgage payment obligation.* Borrowed funds are repaid when the home is sold, never to exceed 95% of the appraised value at the time of sale – even if more money is owed.
Why consider a Reverse Mortgage?
Reverse mortgage funds are first used to pay any liens on the home, including a regular mortgage or home equity loan. In some cases, a portion of proceeds is withheld or set aside to pay taxes and insurance.
Remaining funds often:
- Offset day-to-day living expenses.
- Cover emergency expenditures, such as car or home repairs.
- Pay for medical costs.
- Provide for in-home care, allowing the owner to remain in their own home longer.
Sometimes, homeowners use a reverse mortgage just to pay off their existing loan. They do not access the remaining funds at all, but they remove the strain of a monthly mortgage payment* from their budget and increase their cash flow. Some seniors use reverse mortgages to purchase a new home without ever incurring a monthly payment.*
Before entering an agreement, borrowers are required to attend a session with an independent HUD-certified* counselor who will fully explain the reverse mortgage process, answer questions, and discuss other available options.
Remember that a reverse mortgage is a loan that will be repaid after your death, after you permanently leave your home, or after the sale of your home. Neither you nor your heirs will be responsible for repaying more than the value of your home at sale.
Basic Reverse Mortgage Requirements for Borrowers
- Borrowers on the home’s title must be at least 62 years old. The older you are, the more funds you can receive from a reverse mortgage
- You must live in your home as your primary residence for the life of the reverse mortgage
- You must own your home outright or have at least 50% equity in your home to be eligible for a reverse mortgage loan
- You must meet with a Department of Housing and Urban Development (HUD)-approved* reverse mortgage counselor prior to applying for a reverse mortgage loan
Basic Reverse Mortgage Property Requirements
- Single-family homes, or 2-to-4 unit properties with one unit occupied by you
- Manufactured homes (built after June 1976) that meet HUD* requirements
- Condominiums that are FHA-approved*
- Townhouses
Reverse Mortgage FAQs
Will I eventually be evicted? Click to open answer
Maintain your property to FHA standards, use it for your primary residence, pay your taxes and insurance, and there is no risk of losing your home.
Do I have to study and take a test? Click to open answer
You will have to attend a session with a HUD-approved counselor. You will learn all about reverse mortgages and the options available. This is an extra measure of protection for you, no test required.
Will my children have to pay back the money? Click to open answer
Your heirs are not liable for debt on your home. Your estate will pay only the loan amount or the value of your home at sale, whichever is less.