Reverse Mortgage Information

The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both.

You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM. They will also discuss provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you should be able to make an independent, informed decision of whether this product will meet your needs. You can search online for a HECM counselor.

You can use a reverse mortgage calculator to help you see if you qualify. If you meet the eligibility criteria, you can complete a reverse mortgage application by contacting a FHA-approved lender.

Borrower Requirements

You must:

● Be 62 years of age or older
● Own the property outright or have a small mortgage balance
● Occupy the property as your principal residence
● Not be delinquent on any federal debt
● Participate in a consumer information session given by an approved HECM counselor

Mortgage Amount Based On

● Age of the youngest borrower
● Current interest rate
● Lesser of appraised value or the HECM FHA mortgage limit or the sales price
● Initial Mortgage Insurance Premium (MIP)--your choices are HECM Standard or HECM SAVER initial MIP

Financial Requirements

● No income or employment qualifications are required of the borrower
● No repayment as long as the property is your principal residence and the obligations of the mortgage are met
● Closing costs may be financed in the mortgage

Property Requirements

The following eligible property types must meet all FHA property standards and flood requirements:

● Single family home or 1-4 unit home with one unit occupied by the borrower
● HUD-approved condominium
● Manufactured home that meets FHA requirements

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

FHA Reverse Mortgages (HECMs) for Consumers

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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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