Reverse Mortgage FAQ

What is a reverse mortgage?

A reverse mortgage is a loan that a senior citizen may take out on his/her home to convert the home equity into cash. Based on the applicant’s age, the value of the home and its location, reverse mortgages supply either a lump sum payment or a monthly stipend or a credit line. No payments are made on the mortgage until the borrower dies or puts the home up for sale.

What is a HECM?

A HECM is HUD’s term for a reverse mortgage; it stands for Home Equity Conversion Loan. HUD insures ninety percent of the reverse mortgages provided in the United States. While the actual lender is a commercial bank, HUD’s mortgage requirements and mandatory counseling make sure that you understand your reverse mortgage and that its terms are fair.

Do I qualify for a reverse mortgage?

In order to qualify, you and any co-owner of the property must be 62 years of age or older. The home must be paid off, or you must be able to close out the original mortgage with funds from the reverse mortgage. You must go through a counseling session with a HUD approved counselor to make sure you understand the loan and its implications.

Can I lose my home with a reverse mortgage?

No. HUD insured reverse mortgages provide that you may remain in the home as long as you live or until you choose to sell it. You can never owe more on the home than its value. If when the mortgage is paid off and the home’s sale value isn’t enough, HUD’s insurance policy will make up the difference.

How big a reverse mortgage can I get?

The amount available to you through a HUD approved reverse mortgage depends on several factors: your age; the appraised value of the house and the location of the house. The limit on HUD reverse mortgages is derived from a formula that includes your age, the value of your home and the median value of homes in your area. Right now the maximum amounts range from$200,160 to $362,790. Fannie Mae has its own reverse mortgage program called HomeKeepers that has a uniform maximum of $417,000. The interest rates and fees are higher for this program than the HUD counterpart.

How is the money paid out?

Your first obligation is to pay off any debt remaining on the original mortgage and to pay the closing costs. Thereafter you have several options. You can take the money in a lump sum; you can take monthly stipends; or you can use the reverse mortgage as a line of credit.

Find reverse mortgage lenders offering HECM products.