What Is a Reverse Mortgage?
The HECM reverse mortgage is a loan that uses your home’s equity as collateral. The loan is for seniors 62 and older and is insured by the Federal Housing Administration (FHA).
How Does a Reverse Mortgage Work?
- The amount borrowed is determined by the age of the youngest borrower (a minimum of 62), interest rates, the lesser of the home’s appraised value, sale price and the maximum lending limit.
- You still own your home as long as you meet the obligations of the loan terms such as paying the property taxes, insurance, and maintaining the home in compliance with the FHA guidelines.
- There are a variety of ways the funds can be distributed:
- Monthly Payments
- Line of Credit
- Partial/Full lump sum
- A combination of the above
- There are no monthly mortgage payments.
- Repayment will occur when the last borrower moves out of the home or passes away. What normally happens is that the home is sold to repay the reverse mortgage loan. If there is any remaining equity after the loan is repaid, is given to the heir(s). In the case that the heir decides to keep the home, the heir can pay back the loan in other ways, such as a traditional mortgage loan.
- Since the loan is FHA insured, if the housing market declines and your loan is worth more than your home, the FHA insurance will cover the difference.
What Are the Benefits of a Reverse Mortgage?
- Fund long term care
- Fund your children’s or grandchildren’s education
- Maintain a line of credit for an emergency fund
- Pay of high-interest medical bills
- Home Improvement
- Fund Life Insurance
- Fund health insurance in early retirement until Medicare kicks in at 65
- Have Peace of mind with debt consolidation
- Pay for Travel
- Guard against inflation
Have more questions about reverse mortgage?
You can schedule a free session with our reverse mortgage specialist Chris Brundige by calling 901-491-0349