What is a Reverse Mortgage?

Homeowners 62 and over with substantial equity could be eligible. Equity requirements vary by age.  

With a Home Equity loan or line-of-credit, you have to make monthly payments – with a reverse mortgage; you do not need to pay back the loan until the last surviving borrower leaves the home permanently.

A considerable amount of equity is usually needed, because any existing mortgage(s) and liens against the property must be paid off at or before closing. However, when the loan proceeds are not sufficient to pay off the mortgage(s) or lien(s) the borrower may bring the shortage to closing.

The Homeowner remains in title to their home. There are no pre-payment penalties, and you can sell the home anytime you like!

Interest rates can be either fixed or adjustable depending on what you choose, and how you want to receive the loan proceeds. Interest is accrued based upon the amount of money you withdraw.

Additional costs typically include origination fee, closing costs and FHA Mortgage Insurance premiums. These costs can be included in to the reverse mortgage and paid (with interest) when the loan becomes due.

When the death of the last covered borrowing spouse occurs. At this point the family has every opportunity to sell the home (if there is net equity left), buy the home for 95% of value, refinance the home to facilitate transfer to a surviving member of the family, or hand the keys back to FHA, with no financial recourse of any kind!

The Homeowner remains in title to their home. There are no pre-payment penalties, and you can sell the home anytime you like!

The Homeowner will always have positive equity! Even if the home is “upside down”, your heirs may purchase the home for 95% of the then current value.

A Reverse Mortgage can be used to purchase a home. However, the new loan will likely be set at 100% of the principal limit. So no line of credit or monthly stipend or LESA account is generally available, unless you put additional funds down.

You can stay in your own home, for as long as you are able! There is no limit to how long you can stay in your home.

The amount of money you can borrow depends on several factors, including your age, current interest rates, the appraised value of your home, the Federal Housing Administration’s (FHA’s) lending limit, and your past payment history of property charges, installment and revolving credit accounts.

The Homeowner will always have positive equity! Even if the home is “upside down”, your heirs may purchase the home for 95% of the then current value. One of the benefits of a reverse mortgages is that they are insured by the Federal Housing Administration (FHA) which protects you from ever having to repay more than what your home is worth. This is referred to as a non-recourse type of loan.