Your information resource for reverse mortgages.
What Is a Reverse Mortgage?
A Reverse Mortgage is a federally insured, private loan also known as a HECM (Home Equity Conversion Loan). Sometimes referred to as a "reverse loan," "reverse home mortgage," or "reverse loan mortgage," this type of loan enables homeowners 62 and older to borrow against a percentage of the equity in their home without giving up title or selling their home.
About Reverse Mortgage Lenders
After the process begins with a reverse mortgage loan application, you will work with a reverse mortgage lending institution, such as a mortgage lender, bank, credit union, or savings and loan association, to obtain the HECM loan. The amount you can borrow depends on your age or the co-owner's age (whichever is less), the current interest rate, other loan fees, and the appraised value of your home or FHA's lending limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest rate, the more you can borrow.
After a reverse mortgage is in place there is no requirement to make any monthly payments. The borrower can never be forced out of their home provided they maintain the home properly and pay their property taxes and home owners insurance. The reverse loan does not become due until the borrower no longer occupies the property as their primary residence. The borrower will never owe more than their home is worth.
Reverse mortgages have emerged as a significant financial tool for many senior homeowners. These loans cover a wide range of needs that can be satisfied such as:
- Paying off a conventional mortgage and eliminate monthly payments
- Increasing monthly income through the Tenure plan
- Creating a Line of Credit (LOC) for future needs
- Estate Planning
- Gifting
- Funding Health Care
Getting a Reverse Mortgage
Here are the basic steps to obtain a reverse mortgage:
| Awareness: | Gather information and get educated on reverse mortgages |
| Action: | Select a Reverse Mortgage Bank or other Reverse Mortgage Lender to handle your loan |
| Application: | Fill out and sign the initial reverse loan application and disclosures |
| Counseling: | Get counseling from a HUD-approved counselor |
| Appraisal: | Have a FHA appraisal completed on the property |
| Submit: | Give all necessary paperwork to Underwriting |
| Review: | Reverse Mortgage Lender will review all documents and the appraisal |
| Approval: | Reverse Mortgage Lender approves loan and releases for closing |
| Escrow: | Sign final reverse mortgage loan documents and close loan |
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