Know the Basics

A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live there.* With a reverse mortgage you can turn a portion of the value of your home into cash without having to move or make a mortgage payment each month. The cash you get from a reverse mortgage can be paid to you in several ways:

 

  • All at once, in a single lump sum of cash;
  • As a regular monthly cash advance;
  • As a “credit-line” account that lets you decide when and how much of your available cash is paid to you; or
  • As a combination of these payment methods.

No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age.

OTHER HOME LOANS
To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t have to make monthly repayments. So you don’t need a minimum amount of income to qualify for a reverse mortgage. You could have no income, and still be able to get a reverse mortgage. With most home loans, if you fail to make your monthly repayments, you could lose your home. But with a reverse mortgage, you don’t have any monthly repayments to make. So you can’t lose your home by failing to make them. Reverse mortgagestypically require no repayment for as long as you — or any co-owner(s) of yours — live in your home. So they differ from other home loans in these important ways:
  • You don’t need an income to qualify for a reverse mortgage;and
  • You don’t have to make monthly repayments on a reverse mortgage.

 

LOAN AMOUNTS
The amount of cash you can get depends on your age, current interest rates, and your home’s value. The older you are, the more cash you can get. But if there is more than one owner, the age of the youngest is the one that counts. Typically, the lower interest rates are when the loan closes, the greater your loan amount will be. In general, the greater your home’s appraised value, the more money you can get.The amount of money you can get from a HECM loan also depends on how you want it paid to you: lump sum, creditline, monthly advance, or some combination of these three types of cash advances.
SHARING THE DECISIONS
Who else should you involve in making your decisions about a reverse mortgage? You may have a trusted friend or advisor who knows your circumstances — or someone who is generally good at figuring things out or discussing them with you. You may even want to invite such people to your discussion with a HUD-approved counseling agency.

 

On the other hand, you should be cautious of anyone who seems eager for you to get a reverse mortgage. Be especially alert if that person just happens to have ideas about what you might do with your loan proceeds. Watch out in particular for anyone trying to sell you something, or to get your signature on an agreement to pay them for any purpose.

 

*There are some circumstances that will cause the loan to mature and the balance to become due and payable.  Borrower is still responsible for paying property taxes and insurance.  Credit is subject to age and property qualifications.  Program rates, fees, terms and conditions are not available in all states and subject to change.