866.553.4539

Text Size A A

866.553.4539
Call to speak with a Specialist

How Does A Reverse Mortgage Work

How Does A Reverse Mortgage Work?

Likely, you’ve seen many changes in your lifetime and so have reverse mortgages. Known as Home Equity Conversion Mortgage or HECM, a reverse mortgage is a flexible financial loan product designed for homeowners aged 62 or older. Reverse Mortgage Solutions is one of the largest reverse mortgage lenders in the nation and ready to explain the special features and benefits of this loan program. Current program guidelines make a Home Equity Conversion Mortgage worth considering to support a comfortable retirement.

Eligible borrowers can convert some of the equity in your home into loan proceeds to meet financial goals, such as supplementing retirement income to maintain a quality lifestyle. Maybe additional resources are needed to support unexpected major medical costs or even overdue home repairs and renovations. Or, perhaps you want to buy a new home to be closer to family and grandkids. Our licensed Loan Officers are available to help you evaluate options and prepare for a more rewarding financial future.

Borrowers continue to live in your home without giving up ownership or control of your residence and without having to make monthly mortgage payments.* Of course, as homeowners, you are responsible for occupying the home as your primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance and any homeowners’ fees.

Instead of repaying the loan in monthly installments, you or your estate repay the principal, accrued fees and interest when you no longer live in the home. A Home Equity Conversion Mortgage (HECM) is FHA-Insured. FHA insurance guarantees that borrowers will be able to access their authorized loan funds in the future, subject to the terms of the loan, even if the loan balance exceeds the value of the home or if the lender experiences financial difficulty. Borrowers or their estates are not liable for loan balances that exceed the value of the home at repayment – FHA insurance covers this risk.

You decide how you would like to receive your loan proceeds based on your individual financial needs and objectives. For example:

  • A monthly payment will supplement your income each month.
  • A lump sum will provide your available funds at once, subject to initial disbursement limits.
  • A line of credit will allow you to withdraw cash as you need it.
  • Any combination of the above will give you the added value of flexibility to meet your personal financial requirements.

Reverse Mortgage Solutions will provide the education and tools to help you choose the most practical option for you. No matter how you choose to have the funds paid to you, your loan proceeds are tax free. Please consult your tax advisor for full details about your individual tax situation.

Benefits of a reverse mortgage

For many homeowners aged 62 and over, a Home Equity Conversion Mortgage, or reverse mortgage, could be the most effective way to turn the equity in your home into loan proceeds you can use to support financial goals. According to an independent national reverse mortgage industry study, nearly 1 million homeowners have chosen this type of loan and 9 of 10 reverse mortgage borrowers rate their overall experience as positive.** Take a look at these Home Equity Conversion Mortgage benefits from Reverse Mortgage Solutions:

  • Continue to live in and own your home. Stay in your home as long as you occupy the home as your primary residence, keep up with property maintenance, and stay current on paying your property taxes, required insurance and any homeowners’ fees.
  • Your family is protected. If your spouse survives you and is a co-borrower, your spouse can keep enjoying the benefits that Home Equity Conversion Mortgage provides as long as he or she continues to own and live in the home and meets the terms of the loan.
  • No debt is passed along to heirs. Your estate an either keep the home and repay the loan balance, including accrued interest and fees, or sell the home to pay off the loan, including accrued interest and fees.
  • A Home Equity Conversion Mortgage (HECM) is FHA-Insured. FHA insurance guarantees that borrowers will be able to access their authorized loan funds in the future, subject to the terms of the loan, even if the loan balance exceeds the value of the home or if the lender experiences financial difficulty. Borrowers or their estates are not liable for loan balances that exceed the value of the home at repayment – FHA insurance covers this risk.
  • Your loan proceeds are tax free. Talk to your tax specialist for information about your situation.
  • Use the funds for most anything you want: meet short-term financial goals; maintain a quality lifestyle; prepare for a more rewarding retirement; pay unexpected medical bills; or do home repairs and renovations … important things that may not have been within reach previously.
  • Without compromising your Social Security or Medicare benefits, you can enjoy greater financial flexibility. Typically, your Social Security, Medicare and pension benefits will not be affected, because a Home Equity Conversion Mortgage is considered to be “loan proceeds” and not income. However, Medicaid, Supplemental Security Income (SSI) and other needs-based programs, which vary from state to state, may be impacted. Please consult with a benefits professional to get complete details regarding your situation.

Take a deep breath. Imagine the relief of no more monthly mortgage payments*. Enjoy flexibility and comfort of having an available source of loan proceeds when you need it. Envision the life you could live with a Home Equity Conversion Mortgage from Reverse Mortgage Solutions.

Eligibility for a reverse mortgage

To be eligible for a Home Equity Conversion Mortgage (HECM) loan, all borrowers must be at least 62 or older. The home must be owned free and clear, or all existing liens and mandatory obligations must be satisfied. Borrowers must own the home, occupy it as their primary residence, keep up with property maintenance, and stay current on paying property taxes, required insurance, and any homeowners’ fees.

If there is a mortgage balance, it must be paid off completely with the proceeds of the reverse mortgage at closing. Normally, 40 to 50% equity is needed to qualify, but a reverse mortgage can still be done as long as there are enough proceeds from the reverse mortgage to pay off any current liens.

Eligible home types

Many home types are eligible, including:

  • One- to four-unit owner-occupied homes
  • Approved townhomes, condominiums and manufactured homes

How do they differ: reverse mortgage vs. a home equity loan

With traditional loans such as a home equity loan, a second mortgage, or a home equity line of credit, homeowners must still make monthly payments to repay the loans. With a Home Equity Conversion Mortgage or reverse mortgage, you receive funds from the equity in your home, and you are not required to make monthly mortgage payments as long as you occupy the home as your principal residence, keep up with property maintenance, and stay current on paying your property taxes, required insurance, and any homeowners’ fees.

Instead of repaying the loan in monthly installments, you or your estate repay the principal, accrued fees and interest when you no longer live in the home.

Generally, the higher the value of the home, the higher the loan amount will be, up to the maximum lending limits of the Federal Housing Administration (FHA).

What causes a loan to become due

Typically, the loan does not become due as long as one of the borrowers on the title live in the home as a primary residence and maintain the home in accordance with FHA guidelines, including keeping up with property maintenance and repairs, as well as keeping property taxes, required insurance and any homeowners’ fees current. The loan balance, which includes accrued fees and interest, is due when the borrowers no longer occupy the home as their primary residence or fail to meet their obligations under the terms of the loan.

Estate inheritance peace of mind

In the event of death, the homeowners’ estate can choose to repay the HECM loan balance, including accrued fees and interest, and keep the home or sell the home in order to repay the loan.

If the equity in the home is higher than the balance of the loan, the remaining equity belongs to the estate and heirs.

No other assets of the estate are affected by a Home Equity Conversion Mortgage.

Loan proceeds available to you

The loan proceeds available to you from a Home Equity Conversion Mortgage depends on several factors, such as the borrowers’ age; the current interest rate; the initial mortgage insurance premium; and the lesser of appraised value, the HECM FHA mortgage limit of $636,150 or the sales price.

In addition, the funds available to you may be restricted for the first 12 months after loan closing due to government guidelines and HECM requirements. Use our confidential Reverse Mortgage Solutions Reverse Mortgage Calculator to estimate how much you could receive to support your financial goals.

Live the life you planned on. Reverse Mortgage Solutions licensed Loan Officers are available to answer your questions with no obligation to you. Please contact us today.

* Borrowers remain responsible for occupying the home as their primary residence, keeping up with property maintenance and staying current on paying property taxes, required insurance and any homeowners’ fees. The balance of the loan, including accrued interest and fees, becomes due when the borrowers do not use the home as their primary residence or fail to meet their responsibilities under the terms of the loan.

**http://www.reversereview.com/magazine/nrmla-news.html