Reverse Mortgage

Reverse Mortgage

Since 1989, the Home Equity Conversion Mortgage (HECM) has been insured by the federal government through the Federal Housing Administration (FHA), a division of HUD. It is better known as the reverse mortgage program and it has helped thousands of homeowners safely access a portion of the equity in their homes to enjoy their retirement years better.

A Reverse Mortgage is just like other types of mortgages. There is one exception, the borrower doesn’t have to make a principal & interest payment (property tax, insurance payments and applicable HOA fees are still necessary). A Reverse Mortgage serves as a loan for a older homeowner by using part of the home equity as collateral. What this means is that the loan comes due when the borrower moves out permanently, sells the home, passes away, or does not fulfill their financial obligations. When the homeowner moves or passes, the proceeds of the home sale go to the lender to repay the mortgage balance. Any proceeds beyond the loan balance go to the homeowner (or the estate if passed). Heirs may elect to pay off the loan so they can retain the family home.

Who is eligible for a Reverse Mortgage?

In order to be eligible for a Reverse Mortgage, the applicant must be 62 years or older, own the property, and occupy it as their primary residence. In addition, they must maintain the home with needed repairs, property taxes and insurance. Also, the property does need to meet certain FHA property standards. Finally, the applicant must participate in a reverse mortgage counseling session (this can be done over the phone or in-person.)

What are the Requirements?

All reverse mortgages carry some borrower requirements.
Here are the basics:

  • At least one homeowner must be at least 62 years of age.
  • You must reside in the home as your primary residence.
  • Your home must be either a single-family home, a two- to four-unit owner-occupied home, a townhouse, an approved condominium unit, or certain manufactured homes.
  • You must attend an educational HUD-approved counseling session by phone or in person.
  • You must pass financial assessment guidelines and continue to pay future property charges such as property taxes and homeowners insurance.