What is a Reverse Mortgage
A “Reverse Mortgage” or Home Equity Conversion Mortgage (HECM), is just a loan, although a unique loan that enables senior homeowners (62+) to:
- Access to the equity in their current home, without having to sell the home or give up title.
- Combine proceeds from the sale of your current home to buy a new home while expanding your price range.
- With either option there are NO required monthly principal and interest payments.*
*Borrower must remain current on property taxes, homeowner’s insurance, home maintenance and HOA fees (if applicable). Must be the Borrower’s primary residence.
Reverse Mortgage Benefits
- Principal & Interest payments are not required but can be made.
- The Non-Borrowing spouse* can remain in the home for life after the borrower passes away or goes into a nursing home.
- The borrower will never owe more than the home’s value.
- When the home is sold any remaining equity beyond the loan balance belongs to the homeowner or their estate.
- Heirs may keep the home by paying the lesser of the loan balance or 95% of the current appraised value of the home or simply return the home to the lender with no effects on their credit.
* Spouse = Legally married at the time the loan is closed
How do they work?
Eligibility
Age 62+, primary residence, credit score is considered but, is not the predominate factor in loan approval.
Borrower responsibilities
Live in the home as a primary residence, pay property taxes, HOI, HOA (if applicable) and maintain the property
Benefit determined by
Age of the youngest borrower on title, appraised value of the home, current expected interest rates and the product chosen.
Common Uses
- Purchase a home without spending all your cash while still expanding your budget and price range.
- Pay off your current mortgage and eliminate the monthly mortgage payment.
- Provide a line of credit for future financial needs.
- Help pay for Long Term Care needs.
- Fund living expenses without having to liquidate assets from your investment portfolio.
Consumer Safeguards
Borrowers are protected by a wide range of safeguards, making the HECM the safest most regulated HUD mortgage available. These include:
- Independent third-party counseling prior to application so you can better understand all your options.
- Non-recourse loan – The house stands alone for the debt; in the unlikely event the home is worth less than the loan balance you can simply return the home to the lender without any negative consequences).
- The homeowner retains title to the home as long as the loan terms are satisfied.*
- The homeowner or their Heirs are entitled to any remaining equity after the loan is paid off.
*Borrower must remain current on property taxes, homeowner’s insurance, home maintenance and HOA fees (if applicable). Must be the Borrower’s primary residence.
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