A reverse mortgage is a unique, Federal Housing Administration (FHA)-insured loan that allows eligible homeowners age 62 years and older to convert a portion of their home’s equity into tax-free funds without having to make monthly mortgage payments. A reverse mortgage loan can help:
Supplement retirement income
Pay off an existing mortgage or other existing debt
Pay for medical care, prescription drugs and in-home care
Cover large or unexpected expenses
Make home improvements and repairs
Stretch retirement savings
With this type of loan, you maintain the title to your home. The loan typically becomes due when the last borrower(s) permanently leave the home. Provided the home is sold to repay the loan, the borrower will never owe more than the appraised value of the home.
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Your home must be a single-family residence in a 1- to 4-unit dwelling, or a FHA-approved condominium. You will still own your home and you can stay in it for as long as you wish, provided you pay your taxes, insurance and maintain the home according to FHA requirements. Since you still own your home with a reverse mortgage loan you’re responsible for the general maintenance and upkeep as well as for paying all ongoing property taxes and insurance. You can often pay for these expenses with funds from your reverse mortgage loan.
The amount of a reverse mortgage can vary based on a number of factors including which reverse mortgage loan product you choose. The amount you can receive depends on the age of the youngest borrower, current interest rates, and the lesser of the appraised value of your home, the sale price or FHA maximum lending limit.
After paying off any existing mortgage, the money you receive from your reverse mortgage loan can be used any way you choose such as paying for medical expenses (including in-home care), home improvement, travel, and living your retirement dreams. There are no limitations or restrictions, once you receive the net proceeds.
As with any loan, there are closing and other costs. However, most fees can be financed as part of the loan. The HUD counseling fee is the only out-of-pocket cost and sometimes is not paid until the closing.
HECM reverse mortgage loan payments typically do not affect your Social Security or Medicare benefits. However, regulations vary for the Federal Supplemental Security Income program and for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps. We suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how HECM payments may affect your particular situation.
The most common way is to draw from a line of credit to use at your discretion. However, you may also choose to receive a single lump sum, regular monthly installments, or any combination of these options.
Reverse Mortgages can also be used to purchase a new primary home! This will let you buy more home than you would for cash and still never have a mortgage payment. Your credit score will not matter and your income is not an issue. Again, the amount of the mortgage you will qualify for will depend on your age and the purchase price/value of the property. You can buy a single family home or a condominium as long as the condominium is FHA approved. We would be happy to explain this process to you in detail. It is actually requires much less on your part than a traditional mortgage.
Let's discuss how a Reverse Mortgage may improve your life!