A reverse mortgage is a loan for senior homeowners that allows them to access part of their home’s equity. A borrower can receive the cash distribution in a lump sum, in equal monthly payments, as a line of credit, or in a combination of these options. Unlike a home equity loan, the borrower is not required to make monthly mortgage payments.
Generally, the reverse mortgage will not become due if the borrower meets certain obligations. For example, you must live in the home as your primary residence, pay property taxes and insurance, and maintain the house.
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We’re here for you. A reverse mortgage does not work the same as other home loans. We have put together a short video introducing the concept that will help answer some of your questions.
We have local, licensed loan specialists who can meet with you to answer your questions and give you straightforward guidance based on your specific needs and concerns.
There are several aspects of reverse mortgage loans that make them attractive to homeowners. The proceeds can be tax-free, the heirs have the option to keep the home, and the loan is non-recourse, which can protect the estate should the home value fall below the loan value.
Because these loans are complicated, and can lead to difficulty for the borrower to pay lump sum taxes or insurance premiums, they may not be appropriate for everyone. There are now safeguards in place to help homeowners avoid any negative consequences of taking out this type of loan.
For more information, complete our contact form and we will have a reputable, licensed representative contact you.
The FHA-insured Home Equity Conversion Mortgage, or HECM, was signed into law in 1988.
In the United States, the reverse mortgage is a non-recourse loan. In simple terms, borrowers are not responsible to repay any loan balance that exceeds the net-sales proceeds of their home. For example, if the last borrower left the home, the loan balance on their FHA-insured reverse mortgage was $125,000, and the home sold for $100,000, neither the borrower nor their heirs would be responsible for the $25,000 on the reverse mortgage loan that exceeded the value of their home. The extra $25,000 would be paid from the FHA insurance that was purchased when the HECM loan was originated. A reverse mortgage cannot go upside down. The cost of the FHA mortgage insurance is a one-time fee of 2% of the appraised value of the home, and then an annual fee of 0.5% of the outstanding loan balance.