Reverse Mortgage Information- How They Work
Reverse Mortgage Information
FAQs | Info | Loan Process | Counseling | Glossary | HECM ‘At-A-Glance’
How Reverse Mortgages Work
A reverse mortgage is a home equity loan or mortgage designed for older homeowners. With a reverse mortgage, the lender pays the homeowner either a lump sum, monthly payments or a line of credit to access money over time. Since it is a loan, it must be paid back, but not until the end, after the owners leave the home permanently or sell the property. There are no monthly payments required from the borrower during the time they remain in their home.
Interest is charged on the reverse mortgage loan balance and added to the balance (compounding) and the debt balance continues to increase. In essence, you are using your equity now, while you enjoy your home and there will be less in the future for you or your heirs, although home value appreciation offsets the rising loan balance.
Find out if you qualify for a Reverse Mortgage
Qualifying for a reverse mortgage is easy provided you and any co-borrower:
- are both at least 62 years old
- are living in the home as primary residence
- have balances on any existing mortgages no higher than funds available through a reverse mortgage. Find out if your mortgage is too high for a reverse mortgage
- meet financial assessment requirements
If you apply for a Home Equity Conversion Mortgage (backed by the federal government) you must receive reverse mortgage counseling prior to starting the loan process. See our Reverse Mortgage Counseling page.
Federally Insured Government Reverse Mortgages
Federally backed reverse mortgages are known as Home Equity Conversion Mortgages or HECM. These mortgages have mortgage insurance through the FHA, and guarantees you continue to have access to your funds. The FHA insured HECM also has the benefit of protecting you and your heirs if the loan balance exceeds your home’s value. The home stands for the debt and you would not be required to go out of pocket if there is a deficiency.
The HECM has a maximum claim amount of $625,500 so a higher valued home would cap at that amount. Private jumbo reverse mortgages, also known as Proprietary Reverse Mortgages, are also offered through this company.