Reverse Mortgage Information, Reverse Mortgage Calculator, and Reverse Mortgage Lenders

As part of the Homeownership Act of 2008, The Department of Housing and Urban Development (HUD) recently approved a single national loan limit of $417,000 for federally insured Home Equity Conversion Mortgage (HECM) reverse mortgages. HUD is expecting the loan limit to be effective around November 1st.

The new, higher lending limit will enable borrowers to obtain a greater benefit if their home value is higher than the previous HUD limit. Previously, the HECM program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas.

Similarly, existing borrowers whose home value is greater than the new HUD limit may be able to increase their benefit by refinancing their reverse mortgage and are encouraged to contact their lenders.

HUD is expected to implement the other reverse mortgage provisions from the Homeownership Act in the coming months.

Pros

Provides a guaranteed source of tax-free income for the rest of your life.

Can choose to receive your money as a lump sum, monthly payment, line of credit, or combination of these ways.

Allows you to remain in your home.

You cannot owe more than the value of your home at the time of repayment, no matter your balance.

You do not have to own your home fully in order to qualify for a reverse mortgage.

If the reverse mortgage balance is less than the value of your home at the point of repayment, your heirs get to keep the difference.

The loan can be repaid without selling your home.

Reverse mortgage income will not impact your Medicare and Social Security eligibility.

Ownership and title of the home remain in your name.

You do not have to worry about making a monthly payment with a reverse mortgage as you would if were to borrow money through a home equity line of credit (HELOC).

Your credit score, savings, and income are not used in the loan calculation. Instead, your age, health, home value, and home equity are taken into consideration.

You can cancel the loan for any reason (right of rescission) during the three day period after your reverse mortgage closes.

Cons

Reverse mortgages can be very expensive. Costly fees, interest rates, mortgage insurance, and closing costs may apply.

Limited to borrowers 62 years old or older.

Reduces the home equity amount you leave to your children or grandchildren.

You still remain responsible for paying property taxes, insurance, and repairs on your home. If you fail to keep up with these costs, you may be required to repay your reverse mortgage early.

Any balance remaining on your first mortgage will be included in the balance of your reverse mortgage.

The loan has to be repaid when you die, sell your home, or no longer use it as your primary residence.

Your heirs will have to pay off the balance plus interest when the loan term ends.

May impact your ability to qualify for Medicaid and Supplemental Social Security benefits.

There are caps on how much you can borrow with most reverse mortgage programs.

A reverse mortgage is more expensive and binding that establishing a home equity line of credit.

You are required to meet with a reverse mortgage counselor before obtaining the loan.

After the three day period passes, the loan is final. Refinancing a reverse mortgage is difficult and costly.

Can I qualify for a HUD reverse mortgage?

To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home.

You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

How do I receive Reverse Mortgage payments?

You have five options:

Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

Term - equal monthly payments for a fixed period of months selected.

Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.

Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.

Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Reverse Mortgage Information

New Reverse Mortgage Loan Limits

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Pros

Cons

What types of homes are eligible for a reverse mortgage?

Can I qualify for a HUD reverse mortgage?

How much money can I get from my home from a reverse mortgage?

Can the lender take my home away if I outlive the reverse mortgage loan?

How do I receive Reverse Mortgage payments?

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