What is a reverse mortgage or home equity conversion mortgage (HECM)?
Homeowners aged 62 and older can cash out a portion of the equity in their home. The equity can be paid out as a lump sum, monthly, or through a line of credit. Most reverse mortgages are insured by the FHA as part of the Home Equity Conversion Mortgage (HECM) program. HECM reverse mortgage borrowers do not have to repay the loan until they no longer use their home as a primary residence, fail to meet the mortgage terms, or when the last borrower dies.
What are the benefits of reverse mortgages?
Senior homeowners can pay off an existing mortgage, get help with healthcare expenses, and receive supplemental income. There are no restrictions on how the funds may be used. No credit or monthly mortgage payments are required. Government benefit programs such as Social Security and Medicare will not be affected by a reverse mortgage. The HECM program offers purchase and refinance loan options from reverse mortgage companies.
Does my home qualify for a reverse mortgage?
Most single and multi-family homes with at least one unit occupied by the borrower qualify. Approved condominiums and manufactured homes are also eligible if it is approved by the U.S. Department of Housing and Urban Development (HUD). All homes must meet FHA minimum property standards.
What does a reverse mortgage cost?
Reverse mortgage lenders generally charge an origination fee and closing costs, as well as servicing fees. Many borrowers choose to pay for the upfront costs using their reverse mortgage loan. However, this tends to be more expensive than paying them out of pocket due to reverse mortgage interest rates. Speak with multiple lenders to help you compare your options and find the best option for you.
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