A reverse mortgage is a unique financial tool that enables senior homeowners, age 62 and older, the ability to convert a portion of the equity from their primary residence into tax-free income without relinquishing ownership of making monthly mortgage payments. Repayment of the reverse mortgage does not occur until the borrower permanently moves, sell the home, or passes away.
How can I qualify for a Reverse Mortgage?
To be eligible for a reverse mortgage, the Federal Housing Administration requires the homeowner to be 62 years of age or older, and occupy the home as your primary residence. Furthermore, you are required to receive consumer information from HUD-approved counselor.
Can I apply if I don’t presently have an FHA insured mortgage?
Yes!
It doesn't matter if you currently have FHA-insured mortgage or not. Your reverse mortgage will be a new FHA-insured mortgage loan.
What types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. (It is also possible for individual condominiums units to qualify under the Spot Loan program.)
What's the difference between a reverse mortgage and a equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments.
The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less.
Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."
Can the lender take my home if I outlive the loan?
No!
You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.
Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by the reverse mortgage loan. This debt will never be passed along to the estate or heirs.
How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. To calculate this amount try this Reverse Mortgage Calculator. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
Try this Reverse Mortgage Calculator!
Should I use an estate planning service to find a reverse mortgage?
We do NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lende
How can I receive my payments?
You have five options:
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 amounts of borrower's choosing until the line of credit is exhausted.
Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
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