What is a reverse mortgage?
Most reverse mortgages today are called Home Equity Conversion Mortgages (HECMs). They are a special federally insured home equity loan that enables older homeowners to access their home equity while they continue to live in their home.
How does a reverse mortgage work?
You borrow against the equity you have in your home. The loan balance grows over time as you convert equity into cash. You don’t have to pay back the loan while you or an eligible spouse live in the home, but you still must pay taxes, insurance and to maintain the home.
How can I qualify for a reverse mortgage?
The borrower must be 62 years of age or older (a non-borrowing spouse may be under 62). You must own the home you’re borrowing against and it must be your primary residence. Plus, you must meet certain financial requirements of the HECM program.
How much can I qualify for?
The loan amount is based on your age, your home’s appraised value (minus any outstanding debt against it), and current market interest rates.
Can I wait until I'm older to take a reverse mortgage?
Eligibility starts at age 62, but the older you are, the better. It’s usually best to wait, especially if you are in your 60s. Borrowing too soon can leave you without financial resources later in life. It’s prudent to consider all your options before committing to any loan.
Can I afford to pay my living expenses, property taxes and insurance?
You can use your proceeds from your reverse mortgage for anything you want, including paying daily living expenses, property taxes, insurance, maintenance on your home and whatever else you choose. The money is yours and can bridge a gap in your budget or fund it outright.
What happens if I leave my home before receiving my full reverse mortgage payment?
You are only responsible for the amount of equity you convert into cash. Any part of the loan that has not been disbursed remains as equity in the home and is yours or becomes part of the estate. When the reverse mortgage balance becomes due, you or your heirs are given a reasonable amount of time to sell your home.
What happens to the family home with a reverse mortgage?
Upon the death of the borrower and any eligible spouse, or in the event they move out of home, the loan amount must be paid in full. Most people need to sell their home to do this. If the amount to pay off the loan is less than the home is worth, the remaining funds revert back to the borrower or his/her estate. Borrowers may leave their home to loved ones if they desire, and heirs may still choose to sell it, or keep it after repaying the loan. There are a variety of ways they can do this.
How do I repay the loan and how much will I owe?
You make no mortgage payments during the life of your reverse mortgage. Only when both you and any eligible spouse have passed away or moved out of the home, must the loan be paid off. At this point, your home will probably need to be sold to pay off the outstanding balance that has been accumulated. But neither you nor your heirs will ever have to pay back more than your home is worth.
What is my next step in determining if a reverse mortgage is right for me?
Talk to a licensed housing counselor like Advised In Reverse (AIR) who knows reverse mortgages inside and out, and truly wants only what’s best for you. We’re educators, not mortgage lenders or brokers. Which means we only have a vested interest in you. We’ll take the time and make the effort to explain everything in plain, straightforward English, especially the fine print.
- We’ll help you and your spouse evaluate your financial needs and goals.
- Discuss why you’re considering a reverse mortgage.
- Explore alternatives you may not have considered.
- Answer any subsequent questions you may have.
- And ultimately, help you arrive at a decision that you can not only live with for the foreseeable future, but feel totally confident and good about.