What Is a Reverse Mortgage Loan?

A reverse mortgage is a loan that is secured by the equity in your home. Provided that you are in compliance with the terms of the reverse mortgage, this loan generally does not have to be repaid until you either sell your home or permanently leave your primary residence.

What types of reverse mortgage products are available?

  • FHA – insured Home Equity Conversion Mortgage (HECM) reverse mortgage

How much am I eligible for?

The amount that you (the borrower) will be eligible for depends on three factors:

  • The age of the youngest borrower or eligible non-borrowing spouse (All borrowers must be at least 62, a non-borrowing spouse may be under 62)
  • The lesser of the value of the home or the FHA HECM lending limit
  • Expected interest rate

How can I receive money?

Proceeds from a reverse mortgage can be received in any combination of the following:

  • Lump sum
  • Monthly payments (your choice of loan advances for a specific period, or for as long as you live in your home)
  • Line of credit (Payment of taxes, insurance, maintenance of home, lender will set aside a specific amount of money for credit line and Borrower may outlive the monthly payment stream.)
  • Or a combination of all three

What are the “out-of-pocket” costs?

Typically the only out-of-pocket expenses, are the cost of the appraisal and the required HUD-approved consumer counseling session (Other loan costs may be financed with your reverse mortgage, but doing so will reduce the loan proceeds available to you.)

Reverse Mortgage Facts

  • Generally, a reverse mortgage loan does not become due and payable until the last surviving borrower or eligible non-borrowing spouse dies, sells the home, or permanently leaves the primary residence.
  • The homeowner must continue to pay the property taxes and homeowner insurance, as well as maintain proper upkeep of the property. You cannot lose your home under normal circumstances, but please understand foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms. (Taxes and insurance can be paid out of the loan proceeds if so desired.)
  • At the time the loan becomes due and payable, your heirs can choose to either repay the loan (through refinancing, life insurance, etc.) and keep the house, or sell the house to repay the loan.
    You and your heirs will receive all remaining equity if any exists after the sale. Since the reverse mortgage is a NON-RECOURSE LOAN, you and your heirs will never owe more than the amount for which the home is sold, even if there is not sufficient equity to pay off the loan.

Will the lender own my home?

Generally, the lender does not take control of the title and the lender’s interest is limited to the outstanding loan balance. You will retain ownership of your home provided that you comply with the terms of the reverse mortgage loan.

Will my heirs will be responsible for my loan?

The reverse mortgage is a non-recourse loan. This means that the lender can only derive repayment of the loan from the proceeds of the sale of the property. Your heirs will not be responsible for the repayment of the loan beyond the sale amount.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.