Can You Get a Reverse Mortgage on a Home That is Paid Off?
Information
accurate as of
August 2, 2018
in Blog

Can You Get a Reverse Mortgage on a Home That is Paid Off?

Did you know that qualified homeowners can get a reverse mortgage on a home that is paid off? Paying off your home is a huge milestone in your life. After years of making mortgage payments, your home is finally entirely yours, free and clear. Depending on the value of your home, you may have a chunk of equity that is now at your disposal.

Put your home equity to work for you

A reverse mortgage allows you to access a portion of your home equity as usable funds while continuing to live in and own your house. The loan obligations require you to remain financially responsible for the home by paying property taxes, homeowners insurance, and maintaining the home. However, no monthly mortgage payments are required on a reverse mortgage as long as you meet the loan obligations.1

Ways to use the reverse mortgage proceeds

You can use the money from a reverse mortgage any way you choose and you have options for how the proceeds are disbursed. With a fixed rate HECM loan, you can receive the cash in a lump sum. With an adjustable rate HECM loan, you can select:

Tenure – Equal monthly payments
Term – Equal monthly payments for a fixed period of months selected by the borrower.
Line of Credit2Unscheduled payments or installments, at any time and in an amount of your choosing until the line of credit is exhausted.
Modified Tenure – Combination of line of credit plus scheduled monthly payments
Modified Term – Combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
Lump Sum3 (Only available on a fixed-rate) – A single payment.

Borrowers may access the greater of 60 percent of the principal limit amount or all mandatory obligations, as defined by the HECM requirements, plus an additional 10% during the first 12 months after loan closing. The combined total of mandatory obligations plus 10% cannot exceed the principal limit amount established at loan closing.

An added benefit of owning your home free-and-clear when getting a reverse mortgage is that you may be able to access more of your equity than if you had a mortgage.  Since none of the proceeds will go toward paying off current liens against the property, the available funds are yours to use as you choose.

Regardless of how you use choose to receive your proceeds, a reverse mortgage allows you to access your home equity to help you live a more comfortable retirement. To find out how much you qualify for and get answers to your questions fill out the calculator above or call 1.800.976.6211.

Important Disclosures:

1You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.

2 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.

3 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements.  In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance.