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A Reverse mortgage is a financial tool – a loan – to allow homeowners 62 and older to access a portion of the equity in your home, without selling your home, giving up ownership or making monthly payments (but you must continue to pay property taxes and home owner's insurance). Rather than paying money into your home, the lender pays YOU money, releasing some of the equity that you have built up over the years.  

You may still qualify if you currently have another loan on the home.  But a Reverse Mortgage requires you to pay off any existing mortgages before providing additional cash to you.

Effective 2015, "Financial Assessment" was introduced as part of the qualifying process.  The qualifying criteria is based upon your age, value of your home and "willingness" and "capacity" to sustain your obligations after the loan is in place.

The loan amount for which you qualify (called the "Principal Limit" generally depends on four factors:
1)    the age of the youngest borrower on title to the home
2)    the interest rate for the type of loan requested
3)    the lesser of the appraised value of your home or
4)    the national lending limit currently set at $625,500.

If you are 92 years old, you will qualify for more than if you are just 62 years old. 

 

You must pay off all existing mortgages, liens and closing costs before any loan proceeds can be advanced to you.

The available loan proceeds can be paid to you in a lump sum, a fixed amount per month (“term”), equal monthly payment for as long as you occupy your home (“tenure”), a line of credit (to withdraw money on an as-needed basis), or a combination of these choices.

 

However, depending on the value of  your "mandatory obligations", you may be limited to draw no more than 60% of the Principal Limit in the first year of the loan.


Most importantly, it is always your home – the title always remains in your name. You are not obligated to make any mortgage payments while living in the home. Instead, interest is added to the loan and paid when you sell or move out of the home. That is, the loan is due and payable if you have failed to comply with the loan terms (property tax and hazard insurance payments, for example) or when when the last borrower or eligible non-borrowing spouse leaves the property. If the property is bequeathed, your heirs can either sell the home or refinance the home and pay off the mortgage.

Reverse Mortgages that are available under the Home Equity Conversion Mortgage (HECM) program are regulated by the US Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Administration.

Within the HECM offering, there are two types of Reverse Mortgages:  1) those based upon an adjustable interest rate and 2) those based upon a fixed interest rate.  To determine which one may be right for you, there are many considerations including your age, the amount of money you may need to access, the value of your property, your risk tolerance, and more.

How much can I get?  |  What are the steps?  |  Buying a home?

Is a Reverse Mortgage right for you?

Every family situation is different.  Consider the following:

What are you trying to accomplish?  

What current mortgages need to repaid?  

What “cash advance” is needed at funding?  

What is your present income?  

What are current and future cash flow needs?