An FHA reverse mortgage is also commonly known as a Home Equity Conversion Mortgage (HECM). The loan is insured by the Federal Housing Administration.
You must be 62 years or older to qualify for a reverse mortgage, own your home and occupy it as your primary residence.
You have a lot of options for using your funds, the most common uses include:
You can use your funds for whatever you choose, there are no limitations.
A Reverse Mortgage is considered loan proceeds and not income, therefore your benefits will not be impacted.
*Consult a Financial Advisor.
You still own your home, not the bank. You can still leave your home to your heirs.
When the last borrower leaves the home or passes away the Reverse Mortgage loan is repaid. What typically happens is that the home is sold and the proceeds pay back the reverse mortgage loan. After the loan is repaid any remaining equity goes to your heirs. Your heirs have the option of keeping the home and they can pay back the reverse mortgage loan through various options such as a refinance into a Conventional or FHA loan.
Your disbursement option determines the length of the loan. The funds from your Reverse Mortgage can be disbursed in several ways:
Your Reverse Mortgage professional can help you decide what disbursement option is most beneficial for your specific situation and needs.
While in a reverse mortgage, your obligations include:
Definitely not! It’s a misconception that many people have. A reverse mortgage can be a smart and powerful financial planning tool. It can be a great resource in terms of supplementing income and managing retirement risks and options. Your reverse mortgage professional should help you customize your reverse mortgage to meet your particular needs.
Reverse Mortgages are non-recourse loans. Since the loan is insured by the Federal Housing Administration (FHA) if the loan’s balance ends up surpassing the value of the home the FHA insurance covers the difference. Your heirs won’t be responsible for your debt.
Any part of your loan that hasn’t yet been sent to you when you pass away remains as equity in the home. Immediately after the last borrower passes or leaves the home the loan becomes due. However, heirs are given anywhere between 6-12 months (with a possibility of an extension) depending on the loan program to decide what they want to do with the home.
“Maturity events” are instances when a loan becomes due. Maturity events include cases when the last borrower:
After you have signed your final loan documents you have a “rescission period” which means you have 3 days after closing to cancel if you choose, without paying interest. After the loan has funded if you want to end the reverse mortgage you can pay back the loan amount and any interest accrued.
Rates and fee calculations are tied to fixed or variable rates as well as an index and margin. Depending on your particular situation your reverse mortgage professional can provide you with exact fees and interest rates.
If your spouse or adult children are over the age of 62 they could be a qualified borrower.
Yes, there is a possibility of adding a spouse under the age of 62. Your reverse mortgage professional can take a look at your situation and see what options are available in your area.
This material is not from HUD or FHA and has not been approved by HUD or a government agency.