Many senior homeowners are taking advantage of a Reverse Mortgage to supplement their retirement. Its not only flexible; it also offers security and predictability in today's challenging economy. A Reverse Mortgage may be the ideal solution for you.
What's a Reverse Mortgage
A Reverse Mortgage is a loan that allows you to access some of the equity in your home to obtain cash now. The amount you receive is primarily based on:
- current interest rate
- age of the youngest borrower
- appraised value of the home (up to certain limits)
In general, the older you are, the more valuable your home, and the lower your loan balance, the more money you can expect to receive from a Reverse Mortgage.
You can get your money in a lump sum, fixed monthly payments, a line of credit that you can draw upon as needed or a combination of these options. You can use the funds any way you want – to pay bills, meet future financial obligations or simply enhance your lifestyle. Repayment is not due as long as you live in the home as your primary residence, continue to pay required property taxes and homeowner's insurance, and maintain the home according to FHA requirements.
FHA Reverse Mortgage Growth - 1990-2009
Source: FHA Annual Management Report, Fiscal Year 2009
One type of Reverse Mortgage, a Home Equity Conversion Mortgage
or “HECM” is insured by the Federal Housing Administration (FHA).
It offers borrowers a secure, low-risk loan option.
We feature HECM Reverse Mortgages.
History of Reverse Mortgages
During the 1970s, several private banks offered Reverse Mortgage-style loans. These helped seniors remain in their home by using their homes' equity to pay off the mortgage. However these early Reverse Mortgages didn't provide the protections today's loans do. In 1987 the U.S. Department of Housing and Urban Development (HUD) established a trial program issuing government-insured Reverse Mortgages and the Home Equity Conversion Mortgage, or HECM, was born. Since then, HECM Reverse Mortgages have rapidly grown in popularity. The secure, government-insured loans have enabled thousands of seniors to obtain cash to supplement their retirement income.
Reverse Mortgage Q & A
Today, a Reverse Mortgage is becoming an increasingly popular way for seniors to supplement their retirement, offering a secure option for accessing cash bases on the equity in their homes. Here are the answers to common questions you may have about Reverse Mortgages:
What is a Reverse Mortgage?
A Reverse Mortgage is a loan that allows homeowners aged 62 and older to convert a portion of the equity in their home into tax-free cash. HECM Reverse Mortgage loans are insured by eh Federal Housing Administration (HUD).
What is the difference between a Reverse Mortgage and a home equity loan?
With a traditional mortgage or home equity line of credit, you must meet minimum income and credit requirement to qualify for the loan, and you have to make monthly loan payments. With a Reverse Mortgage, there are no credit score and generally no income requirements, nor do you make loan payments.
Do I have to repay a Reverse Mortgage loan?
Yes, Eventually. However, your payment is not due on your Reverse Mortgage loan as long as you live in your home, it's your primary residence, you maintain it according to FHA requirements and you pay required property taxes and insurance.
Do I still own my home with a Reverse Mortgage?
Yes. You keep the title to your home; the lender does not become the title holder. You own and can remain in your home as long as you meet all Reverse Mortgage requirements.
Is any home eligible for a Reverse Mortgage?
Generally, single-family residences, two-to-four-unit owner-occupied dwelling, townhouses, approved condominium units and some manufactured homes are eligible for a Reverse Mortgage. The home must meet FHA minimum property standards. If home repairs are required, in some cases they can be completed after closing using funds from the Reverse Mortgage.
Does a Reverse Mortgage affect my eligibility for Social Security or Medicare benefits?
A Reverse Mortgage usually does not affect eligibility for Medicare or Social Security benefits. Some government benefits, such as Medicaid and Supplemental Security Income (SSI), may be affected by a Reverse Mortgage. You should consult a qualified professional to determine if there would be any impact to your government benefits.
Are there income or credit score requirements necessary to qualify?
No. There are no credit score and generally no income requirements.
The Reverse Mortgage Process
The steps to obtaining a Reverse Mortgage loan include:
1. Examine Your Financial Situation
2. Complete a Reverse Mortgage Application
3. Speak with a HUD Counselor
4. Home Appraisal
5. Loan Processing and Underwriting
6. Loan Closing
7. Receive Your Money