FAQs
What is a Reverse Mortgage?
A reverse mortgage is a government-insured loan that allows seniors ages 62 and above to borrow money accessing the equity in their home. Similar to a traditional mortgage, when you take out a reverse mortgage loan, the title to your home remains in your name. However, unlike a traditional mortgage, with a reverse mortgage loan, borrowers don’t make monthly mortgage payments. The loan becomes due when the borrower no longer lives in the home. Interest and fees are added to the loan balance each month and the loan balance grows.
How do I receive the proceeds from a Reverse Mortgage?
When you take out a reverse mortgage, you have options on how to receive your proceeds:
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Lump sum: Get all the proceeds at once when your loan closes.
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Equal monthly payments (Tenure): For as long as at least one borrower lives in the home as a principal residence, the lender will make steady payments to the borrower.
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Term Payments: Monthly payments for a specified period of time.
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Line of credit: Money is available for the homeowner to borrow as needed. Interest accrues only on amounts actually borrowed from the credit line.
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A Combination of monthly payments and a line of Credit: The lender provides steady monthly payments for as long as at least one borrower occupies the home as a principal residence. If the borrower needs additional money at any point, they can access the line of credit.
Can I buy a Home with a Reverse Mortgage?
Yes, you can also use a reverse mortgage, also known as a “HECM for purchase,” to buy a home as long as the home is your primary residence.
What are the requirements to apply for a Reverse Mortgage?
While reverse mortgages do not have income or credit score requirements, there are rules about who qualifies and the borrowers must be able to demonstrate the ability to pay both property taxes and homeowners insurance. You must be at least 62 years old, and you must either own your home free and clear or have a substantial amount of equity (at least 50%). Borrowers must pay an origination fee, an up-front mortgage insurance premium, other standard closing costs, along with ongoing mortgage insurance premiums (MIPs), loan servicing fees (sometimes), and interest. These costs are typically
added or included as part of the loan balance.
Borrowers are also required to complete a HUD-approved counseling session.