Reverse Mortgages In a Nutshell
A reverse mortgage is a financial tool designed for homeowners and homebuyers at least 62 years old that enables them to convert part of the equity in their homes into tax-free funds. The money used doesn't need to be repaid until the home is sold or otherwise vacated, typically upon the death of the last remaining spouse. No monthly payments are required as long as the borrower(s) lives in the home as their primary residence.
To qualify, one borrower must be at least 62, the home must be their primary residence, and they must attend a counseling session with a HUD-approved counselor.
Obligations include paying property taxes, maintaining the home, and complying with the program terms.
Features include no pre-payment penalties, is a non-recourse loan, a financial assessment, younger spouse protections (was younger than 62 at the time the reverse mortgage was established), and counseling by a third party housing counselor.
The reverse mortgage is unique because there is no monthly mortgage payment required and the interest is deferred until the home is no longer occupied.
The amount of money one qualifies for is determined by age, home value, and interest rates.
Upon death, the estate may repay the loan by selling the home or refinancing the balance.
HUD-required counseling is mandatory to ensure the applicant understands the program.
Reverse mortgages are a time-tested, safe and secure retirement funding tool with hundreds of thousands of seniors utilizing it.
Borrowers still maintain ownership of the home, but the interest accrues on the balance instead of the homeowner making monthly payments.
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Important Information
The information provided is accurate as of the 2-1-2023 and may change without notice. The information is being provided as a service to those individuals interested in a reverse mortgage. The information contained in this publication should not be construed as legal, tax, accounting, financial, investment, or professional retirement advice. Please consult a tax professional regarding any tax implications. This guide does not constitute a commitment to lend or extend credit. Restrictions may apply to all loan programs. All loans are subject to program qualifications and lender approval.
Once your loan is in place you are still responsible for paying property taxes, homeowners insurance, HOA dues, and home maintenance costs. These materials are not from HUD (Department of Housing and Urban Development) or FHA (Federal Housing Administration). Loans are not made, originated, endorsed, or approved by the Federal Government. The FHA provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM (Home Equity Conversion Mortgage) loans.