A reverse mortgage is a loan that allows you to access some of the equity in your home to obtain cash. Thus allowing you to pay off your current mortgage and other debts with no restrictions on how you spend the proceeds. This means you can use the money to make home improvements or repairs, for travel or leisure activities, for medical expenses or long-term care insurance premiums, or to establish a fund for emergency expenses. A reverse mortgage amount is based upon current interest rates, the age of the youngest borrower, and the appraised home value (up to certain limits).
Reverse mortgages allow for you to secure your financial future and meet your retirement goals.
How Can a Reverse Mortgage Help You?
- Pay off your mortgage and other debts
- No restriction on how you use your proceeds
- Make home improvements or repairs
- Provide cash for travel and leisure activities
- Use for medical expenses or long term care insurance premiums
- Establish a fund for emergency expenses
- Typically does not affect Social Security or Medicare benefit eligibility
Eligibility
- No income or credit score requirements
- Must be aged 62 or older
- Must have sufficient equity in your home
- Must pay off existing mortgage (ability to use reverse mortgage proceeds)
- Eligible home types:
- Single family homes
- Approved condos
- 2-4 unit owner-occupied residences
- Some manufactured homes
- Must live in home as primary residence
- Continue to pay property taxes and homeowner's insurance
- Maintain residence according to FHA requirements
Costs and Fees
- No hidden fees
- Most fees can be financed into the loan
- Appraisal, Credit Report, Title and Escrow Fees
- Loan origination fees are capped by the FHA
- FHA mortgage insurance premium (MIP – 2%)
Safeguards
- Right of Rescission – may cancel up to 3 days after loan closes
- Independent Reverse Mortgage Counseling (HUD required)
- Generally, repayment is capped at the value of the loan
- Interest rate cap
- Full disclosure of rates and fees
- Government Insured which means low risk
Disbursement Options
- Lump Sum
- Monthly Payments
- Credit Line
- or Combination of all three previous options
Loan Re-Payment is Typically Due if:
- You decide to sell your home
- You vacate your home for more than 12 months (medical reasons or otherwise)
- The last borrower on the title passes away
- You fail to pay property taxes or homeowner's insurance
- You do not maintain the home according to FHA requirements