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IS YOUR REVERSE MORTGAGE DOABLE?
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Loan Programs Glossary

 
Reverse Mortgage:
  • Are you 62 or older? With a reverse mortgage, you borrow against the value of your home, and receive loan proceeds according to the payment plan that you select.
  • Whether it is in a lump sum to pay an unexpected hospital bill, or a stream of regular payments to supplement your monthly income.
  • No repayment of the loan is required until you no longer occupy the home as your principal residence.
  • You may change payment plans, as many times as you wish.
  • When you sell your home or vacate it for any reason, the accrued interest plus what the lender has lent you through the years is due.
Any credit, any income. Our lenders accept requests for many loans of other property types

What is a reverse mortgage?

Definition of reverse mortgage

A reverse mortgage is a low-interest loan for senior homeowners that uses a home's equity as collateral. The loan amount is a percentage of the home's value and is based on the age of the youngest homeowner. The loan does not have to be repaid until the last surviving homeowner moves out of the property or passes away. When that happens, the estate has about 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not liable if the home sells for less than the balance of the reverse mortgage.

Who is eligible to get a reverse mortgage?

To be eligible for a HUD reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. The person must own your home or have paid off approximately half of your mortgage balance. If there is a mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at the closing (the moment which you sign the legal documents). There are no income or credit requirements for a reverse mortgage.

Eligible home types

Almost all home types are eligible. However, mobile homes must be built in the last 30 years, you must own the land, it must be on a permanent foundation, and it must meet an FHA inspection.

 What is the difference between a reverse mortgage and a home equity loan?

Generally a home equity loan, a second mortgage, or a home equity line of credit have strict requirements for income and creditworthiness. Also, with other traditional loans the person must still make monthly payments to repay the loans. A reverse mortgage has no income or credit requirements and instead of making monthly payments, the person receive payments.
With a reverse mortgage the amount that can be borrowed is determined by an FHA formula that considers age, the current interest rate, and the appraised value of the home. The older the borrower is, the lower the interest rate. The more valuable the home (up to a certain point), the higher the loan amount will be.
With traditional loans borrowers still required to make monthly payments, but with a reverse mortgage the loan is not due as long as the person stay in the home. With a reverse mortgage no one can forced to foreclose or forced the borrower to vacate the home because of a missed mortgage payment.  The borrower is still responsible for real estate taxes, utilities, and maintenance.

Outliving the reverse mortgage

No one can outlive a reverse mortgage. As long as at least one homeowner lives in the home (keeping taxes and insurance current) there's no need to repay the loan. Furthermore, the person will never owe more than the home's value (a reverse mortgage can not become "upside down").

Estate inheritance

In the event of your death or in the event that the person no longer use the home as his/hers primary residence, the estate can choose to convert the reverse mortgage into a traditional mortgage to keep the house or else sell the home to pay the balance (the cash borrowed, interest, and fees).
If the equity in the home is worth more than the amount owed to the lender, the remaining balance belongs to the borrower heirs. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from your estate to pay off the reverse mortgage.
If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA.

Loan limit

The amount that is available depends on three factors: age (older is better), current interest rate, and appraised value of the home.
Use the calculator on this site to find out exactly how much you are eligible for.

Distribution of money from a reverse mortgage

There are several ways to receive the proceeds of a reverse mortgage and you can mix and match as needed.
  • Lump sum - a lump sum of cash at closing.
  • Tenure - equal monthly payments as long as you live in the home.
  • Term - equal monthly payments for a fixed number of years.
  • Line of Credit - take any amount you please at any time until the line of credit is exhausted.

 

 



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