What is a Reverse Mortgage?
A Reverse Mortgage is a mortgage in which a homeowner can borrow money against the value of their home. No repayment of the mortgages principal or interest is required until the home is sold or the borrower(s) do not occupy the home as their primary residence for more than 12 months. The only monthly financial obligations the borrower is responsible for is the taxes, insurance and basic maintenance. Reverse Mortgages allows homeowners aged 62 or older to borrow up to $625,500 depending on several factors, such as the age of the borrower.
With a Home Equity Conversion Mortgage (or HECM) you can turn the equity of your house into cash without having to sell the property, move out of your home, or make monthly mortgage payments. If you are looking for another financial option for retirement, a Home Equity Conversion Mortgage may be just the thing for you.
Breaking down the Reverse Mortgage
A reverse mortgage may provide income that people can access for their retirement. One major convenience of a reverse mortgage is that the borrower’s credit is often not important because the borrower is not required to make any payments. Since the home serves as collateral, the reverse mortgage must be sold or paid within 1 year of the last member of the house vacating the home. Additionally, most reverse mortgages are Home Equity Conversion Mortgages (HECM), which are non-recourse loans insured, by the FHA. Typically, the only upfront, out of pocket costs associated with these loans is the fee charged to appraise a home. All other costs, such as origination costs are not out of pocket costs and become part of the initial loan balance that accrues interest.
How much money can I get from my home?
The amount varies by borrower and depends on:
- Age of the youngest borrower or eligible non-borrowing spouse.
- Current interest rate; and
- Lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price.
- If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
What if my home sells for less than what I owe on the loan?
A home equity conversion mortgage is a non-recourse loan. That means you or your heirs will never owe more than your home is worth. If your home sells for less than what is owed on the loan, FHA insurance pays the difference.
Is there anything else you can tell me about the Home Equity Conversion Mortgage?
The homeowner can opt to have a monthly term payment, a monthly tenure payment, a line of credit, a lump-sum check, or a combination of monthly payments and a line of credit. The monthly term payment only lasts for a specified period of time, whereas the monthly tenure payment lasts as long as the homeowner lives in the home.
- You must be at least 62 years of age or older to qualify
- Insured by the Federal Housing Administration (FHA)
- You can receive HECM money in a lump sum, monthly payments, or even as a line of credit
- Reverse mortgage money can be used for anything; it’s your money, you earned it!
What can a Home Equity Conversion Mortgage do for me?
- Pay off your existing mortgage
- Supplement retirement income
- Consolidate debt
- Cover health care costs
- Make home repairs or improvements
You’ve been paying for your home long enough; it’s time for your home to start giving back. Call us today at (855) MILEND-1 and talk to one of our Home Equity Conversion Mortgage specialists.