Reverse Mortgages
Is a Reverse Mortgage right for you?
Home Equity Conversion Mortgages (HECMs), also known as reverse mortgage loans, were created over 25 years ago to help Americans age 62 and older convert a portion of their home equity into tax-free money. HECM reverse mortgages are insured by the Federal Housing Administration (FHA) and allow seniors to age in place and achieve retirement security.
Qualifications Include:
- The borrower on title must be 62 years or older (a non-borrowing spouse may be under age 62)
- The home must be the borrower’s primary residence
- The borrower must own the home (The borrower must meet the financial requirements of the HECM program)
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Possible Advantages
No monthly mortgage payments*
Tax free proceeds*
Keep your home
Federally-insured by the government
Consumer Safeguards
You can choose to repay the loan at any time without incurring any additional costs.
HECMs are considered nonrecourse loans in which the borrower can never owe more than what the house is worth at the time the loan is paid back.
All reverse mortgage applicants undergo independent, third-party counseling. This ensures that borrowers understand the financial implications associated with their reverse mortgage, what their obligations are and what other alternatives may be available to them. We encourage and support third-party counseling so that you feel completely comfortable with the process and understand your options.
HUD established principal limits on the amount of money you can borrow during the first year of your loan. This may ensure home equity proceeds last longer.
HECM origination fees are regulated by HUD. Other HECM reverse mortgage costs may vary among creditors and loan types.
Financial advisors are including the reverse mortgage growing line of credit as part of their clients’ long-term retirement planning strategies, helping stretch other investments even longer into retirement.
Frequently Asked Questions
No. Reverse mortgage borrowers retain ownership of their homes. They are not relinquishing title or ownership using a reverse mortgage, but borrowing against the value of the home. A borrower may not lose their home under normal circumstances, as long as they comply with loan terms.*
*Borrowers must continue to make property tax, insurance, and other maintenance payments in order to avoid risk of default.
Reverse mortgage funds can be disbursed in a number of ways: full or partial lump sum, as a line of credit, through monthly payments, or a combination of any of these.
Reverse mortgages are non-recourse loans. What this means is that if somehow the loan balance ends up surpassing the value of the home, the lender cannot collect more than the value of the home. Under the HECM program, the difference between the loan balance and the home value is covered by the Federal Housing Administration’s (FHA) insurance fund.
No, these benefits will not be impacted. Reverse mortgage funds are considered loan proceeds and not income. However, Medicaid and other income-based benefits† may possibly be affected. What’s more, the longer you wait to access Social Security benefits, the more you may receive. A reverse mortgage can help delay accessing Social Security in order to boost your lifetime retirement income*.
*Please consult with your tax advisor. Borrower must continue to pay for property taxes, homeowner’s insurance and home maintenance. Social Security benefits estimator available at www.ssa.gov/estimator. Required as part of loan. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Borrowers must continue to make property tax, insurance, and other maintenance payments in order to avoid risk of default.
