Reverse mortgages are all about making the most of the equity that a person has acquired in your home. This type of popular home loan was created specifically for senior homeowners and is supported, and encouraged by their adult children. It allows individuals to borrow against the equity established in their home without having to repay the loan for as long as you live and maintain the home. Instead of making monthly mortgage payments, the home owner will receive them. Reverse mortgages can potentially help a homeowner stay in their home, and still meet their financial obligations.

How Do You Qualify?

In order to qualify you need to meet the following criteria:

• Age 62 years or older
• Occupy the home as a primary residence
• Home meets minimum FHA property standards
• Own your home, or pay off existing mortgage or other liens against home before getting reverse mortgage, or use an immediate cash advance from the reverse to pay them off
• Receive independent third-party counseling

What Are the Benefits of a Reverse Mortgage?

• Allows you to continue to live in your home
• You retain title (ownership) to your home, providing you continue to pay taxes and insurance
• Make no monthly mortgage payments
• There are no income, credit or health qualifications
• Money for whatever you need:
  • Supplement retirement income
  • Pay property taxes
  • Cover medical expenses
  • Make home repairs or improvements
  • Invest in long-term care insurance
  • Pay for in-home care
  • Take a vacation
  • Buy a car
• It is a non-recourse loan meaning the HECM borrower will never owe more than the loan balance or value of the property, whichever is less; and no assets other than the home must be used to repay the debt. This applies only when the borrower or estate choose to sell the property to pay off the reverse mortgage loan. If the borrower or estate want to retain the property the balance must be paid in full
• Enjoy the flexibility of determining how you will receive your cash disbursements
• Repay the loan at any time without penalty
• The HECM loan is FHA-insured

Reverse Mortgages vs. Traditional Mortgage or Home Equity Loans

A reverse mortgage is the opposite of a traditional mortgage. With a traditional mortgage, an individual borrows money and makes monthly mortgage payments.

A reverse mortgage, an individual basically receive money from the lender and don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you pass away, sell your home, or no longer live there as your principal residence.

Eligibility Requirements

The eligibility requirements are quite simple. There is no income, employment or credit qualifying.

• All homeowners must be 62 or older and occupy the property as their principal residence
• The home must be owned free and clear, or have a remaining mortgage balance which can be paid off by a reverse mortgage
• The property must be a single-family or a two-to-four unit dwelling
• Townhomes, detached homes, condominium units, planned unit developments and some manufactured homes are eligible
• The home must meet HUD minimum property standards

How Much Can Be Borrowed?

The maximum amount that can be borrowed is based on the several factors:

• The age of the youngest borrower when loan is taken out
• The appraised value of the home
• The current interest rate
• Amount of equity in your home
• Mortgage program and options chosen

Usually, the more your home is worth, the older you are, and the lower the interest rate is, the more you’ll be able to borrow.

Four Important Things You Should Do Before Getting a Reverse Mortgage

1. Determine if you really need a reverse mortgage or if another type of loan would be better for you. Depending upon your needs and your financial situation, you may be able to meet your goals with another financial solution.
2. See a HUD approved reverse mortgage counselor – free of charge – to help you decide if a reverse mortgage is for you, or to help you choose among the different types of reverse mortgages. The Federal Government has made it mandatory that each Reverse Mortgage applicants go through independent third-party counseling. This is simple and stress-free process, and can be done in person or over the telephone. We can provide you a list of names and phone numbers of HUD counselors in your area.
3. Shop around and compare! Not all reverse mortgages are created equal. They vary substantially in how much cash you can get, what they cost and other features.
4. Consider whether a reverse mortgage might make you ineligible for any public benefits you now receive or may be eligible to receive in the future. For example, if you currently receive or expect to be eligible for any “needs-based” benefits such as Medicaid, MediCal, or Supplemental Social Security Income (SSI), reverse mortgage payments will have to be structured so that monthly payments will be spent within the month they are received. If not, such payments will be considered “income,” and may make you ineligible for public benefits. You should always contact your benefits provider to ask about how a reverse mortgage may affect your eligibility.

Consumer Protections

• Asset protection – non-recourse loan – the HECM borrower (or his or her estate) will never owe more than the loan balance or value of the property, whichever is less; and no assets other than the home must be used to repay the debt. This applies only when the borrower or estate choose to sell the property to pay off the reverse mortgage loan. If the borrower or estate want to retain the property the balance must be paid in full
• Approved counseling required for all reverse mortgage loans
• Adjusted interest rates have lifetime caps
• After estate pays lender, any remaining equity is paid to heirs or estate
• No maturity date – a reverse mortgage cannot become due during the borrower’s lifetime

Important Web Links & Resources

American Association of Retired persons (AARP)

AARP is a nonprofit, nonpartisan membership organization for people 50 and over. They provide information and resources; advocate on legislative, consumer, and legal issues; assist members to serve their communities; and offer a wide range of unique benefits, special products, and services
http://www.aarp.org

Senior Resource

Dedicated to helping seniors with accurate and up-to-date information on senior housing options, finance, insurance and related lifestyle issues.
http://www.seniorresource.com

U.S. Department of Housing

http://www.hud.gov

Fannie Mae

At Fannie Mae, the home symbolizes who we are, too. Our public mission, and our defining goal, is to help more families achieve the American Dream of homeownership.

They do that by providing financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own. Since Fannie Mae began in 1968, we have helped more than 63 million families achieve the American Dream of homeownership.
http://www.fanniemae.com

National Reverse Mortgage Lenders Association (NRMLA)

Established in 1997, NRMLA, headquartered in Washington, DC, is the national voice for lenders and investors engaged in the reverse mortgage business. NRMLA fulfills several roles, which include educating consumers about the opportunity to utilize reverse mortgages, training lenders to be sensitive to the needs of older Americans, developing Best Practices and Code of Conduct to make sure lenders participating in the program treat seniors respectfully, and promoting reverse mortgages in the media.
http://www.nrmla.org

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