Any credit, any income. Our lenders accept requests for many loans of other
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
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
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").
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.
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
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.