Become educated about Reverse Mortgages and learn to make the right choice for your financial future

Reverse Mortgages are beginning to hit Main Stream America. With the popularity of this program growing day by day in America, Reverse Mortgages are a excellent way for seniors to live through their retirement comfortably. One of the first Reverse Mortgage programs, was designed by The U.S. Department of Housing and Urban Development (HUD), it is a federally-insured private loan. This safe plan can give seniors in America greater financial stability. Many Americans who qualify for a Reverse Mortgage use it to replace or balance or ease the demand on their social security, meet unexpected medical expenses, make home improvements, take long deserved vacations and more.

 Homes are usually ones largest single investment. It’s a very smart decision to find out more about reverse mortgages, and to confidently make the decision if this is the route for you. This page was to help further your education and knowledge of the HUD Reverse Mortgage Program.

HECM Reverse Mortgage Program:

The HECM Reverse Mortgage Program can be used by senior homeowners who are the age of 62 or older. Senior homeowners can convert the equity of their home into in cash to borrower. The Reverse Mortgage Loan does not have to be repaid until the borrower no longer occupies the home. The loan, which is commonly known as HECM loan and is FHA-Insured, is funded by a lending institution such as a mortgage lender, bank, or even credit union. To assist the homeowner in making a confident decision in figuring out if this program meets their own criteria’s. The borrower(s) is required to receive FHA/HUD Counseling Session to education and answer any questions they may have. This Counseling Session will by with a FHA/HUD approved counselor.

Counselors will go into detail about the program requirements, financial obligations and legal obligations to obtain a Reverse Mortgage and the necessities for making the mortgage payable. Upon the completion of HECM counseling, the homeowner should be able to make an educated, well-versed decision of whether this program will help their needs.

How Do I qualify for a reverse mortgage?

Eligibility for a Reverse Mortgage is as follows:

• Borrower is a homeowner, 62 years of age or older.
   
• Own your home outright, A low mortgage balance that can be paid off at closing with the reverse loan proceeds
  
• Must live in the home. 
   
• Required to receive FHA/HUD Counseling that is a minimum of forty-five minutes long. This session must be done by a approved counselor prior to obtaining the loan.

What homes are eligible?

Homes must be a single family home, Townhouses, detached homes, units in condominiums and some manufactured homes. Condominiums must be FHA-approved. Other condominiums may qualify under the Spot Loan program.

What if my current home was not purchased with FHA mortgage insurance, can I still apply for a Reverse Mortgage?

YES. It doesn't does not matter if you didn’t buy your home with an FHA-insured mortgage. The new reverse mortgage will be a new FHA mortgage loan.

What kind of money can I get from my home?

The amount borrowed depends on your age, the current interest rate in your county, and the appraised value of your home, whether it will be the appraised value or the FHA Insurance Limit. The older you are, the more your home is worth, the lower the interest, the bigger your loan.

What if I out live the loan? Can I loose my home?

No! As long as a borrower lives in the home and keeps all living conditions, insurance and taxes current, you do not have to repay the loan. You can never owe more than your home's value.

Will there be any of my estate to pass to my heirs?

When no longer using the home as primary residence or you sell your home, you or your estate will repay the loan from the reverse mortgage, including interest and other fees. If there is any equity left in the home, then that is left to your heirs. The Reverse Mortgage loan does not affect any other aspect of your assets. There can be no debt passed on to your heirs. Even if your home isn’t worth the full value of your loan amount, you and your heirs are protected from a “Non-Recourse” cap.

How do I receive my payments?

You have five options in receiving your payments:

•  Tenure - monthly payments as long as at least the borrower lives and continues to occupy the principal residence.
  
•  Term – Payment over a fixed period of months selected, these payments will be of equal amount.
  
•  Line of Credit -payments or in installments, at random times of the 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.

What will I pay?

A Reverse Mortgage involves four types of fees:

•  Origination fee
  
•  Mortgage insurance premiums
  
•  Monthly servicing fee
  
•  Third Party Fees

Generally, financing these costs as part of your loan can be arranged by having them deducted from the loan amount you receive. You will also be paying the interest on the loan, this cannot be deducted from the from the loan amount.

Interest rate adjustments

Every Reverse Mortgage carries variable interest rates, but with some programs you can change the interest rate to an annual or monthly rate.

• Monthly rate adjustments usually have no annual adjustment cap. Capping at ten points over the life of the loan. Monthly rate adjustments make for a larger maximum loan amount.

•  Annual rate adjustments usually cap at five points over the life of the loan, or two points a year. A lower maximum loan amount will be provided.

If choosing your funds as monthly installments, know these rate adjustments do not change the amount you receive each month. The rate adjustments only affect the amount of interest charged on the whole loan balance.

FHA/HUD counseling

Appling for an FHA/HUD Reverse Mortgage requires the borrower(s) to complete a 45-minute counseling session with a FHA/HUD-approved counselor. The counselor will explain the legal obligations and financial obligations of the reverse mortgage, also going over the process with you. The borrower receives a "certificate of counseling" after the session. This is required before the loan application can continue.