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These materials are not from HUD or FHA and were not approved by HUD or a government agency.
CA Dept. Real Estate-Real Estate Broker- DRE#01833913 NMLS # 273172
A California Corporation
Licensed to originate mortgages in CA, OR, MT, ID and CO
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What is a reverse mortgage loan?
Reverse mortgage loans are a way for older homeowners to convert their home's value into tax-free *Not Tax Advice, consult a tax professional* cash from the loan, without having to sell or move. Insured by the U.S. government, the Department of Housing and Urban Development (HUD) allows Homeowners who are 62 or older to borrow against the equity of their homes.
Here’s how it works:
- Qualifying homeowners can choose to receive tax-free loan payments from reverse mortgage loan, lenders either on a monthly basis, in a lump sum, or as a line of credit.
- Minimal income and credit requirements apply in light of 2015 Financial Assessment.
- No repayments are required while a borrower lives in the home and continues to comply with loan terms, such as paying taxes, insurance and home maintenance expenses.
- Social Security and Medicare benefits are not affected. Other benefits like Medicaid or SSI can be impacted
- Reverse mortgage lenders usually recover the loan amount, plus interest when the home is sold (because owners choose to move, or pass away)
- When the loan is paid in full, all equity associated with the property will be distributed to your heirs.
Keep in mind: Reverse mortgage borrowers continue to own their homes. Because there are no monthly loan payments due, the amount owed grows over time. This means that the amount and the remaining equity in the home decreases.
Borrowers must continue to pay homeowner’s insurance and property taxes during the loan period. It is also the borrower’s responsibility to keep up with repairs. In fact, if a borrower fails to adhere to any of these obligations, it may become immediate cause for the loan to become due. In which case, it would become payable in full.
Do I qualify for a reverse mortgage loan? You must be age 62 or older. And you must occupy the home as your primary residence – for the majority of the year. Borrowers must own the home outright or have a low enough balance on the existing mortgage that it can be paid off from the proceeds of the reverse mortgage. Each borrower listed on the title must apply for the reverse mortgage loan, attend a HUD counseling session and sign the loan papers. The HUD counseling is either handled in person, or over the telephone for a nominal fee. It will then be determined if one can meet minimal income and credit requirements which establishes if you can meet your obligations under the loan to pay taxes, insurances and other expenses associated with owning the home.
Does my home qualify for a reverse mortgage loan? The reverse mortgage loan must also be the only mortgage held against the residence. This means that if there is a current mortgage on the property, it must be able to be paid off with the proceeds of the reverse mortgage.
Examples of qualifying homes:
- Single Family One-Unit Residences
- 2-4 Unit Owner-Occupied Residences
Ask your lender if these residences qualify:
- Manufactured Homes (may not in a leasehold estate)
- Condominiums
- Planned Unit Developments
How is the loan amount determined?
The amount of the loan is based on:
- The age of the youngest borrower
- The appraised amount of the property
- Minimal income or credit requirements however credit report is pulled to insure ability to pay property taxes and hazard insurance
What are my reverse mortgage loan options?
HECM -- The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is insured by the Federal Housing Administration (FHA). The FHA guarantees that HECM lenders meet their obligations, governs how much HECM lenders may loan to qualified borrowers, and limiting loan costs. Because this is a FHA insured product, loan counseling is required, by an approved HUD counselor.
HECM offers 4 draw options:
- Monthly payments for a fixed term, or life
- Payments
- Lump sum
- Any combination of the above 3