Important Things To Know About Reverse Mortgages
Information
accurate as of
June 17, 2019
in Blog

Important Things To Know About Reverse Mortgages

A recent article about reverse mortgages was posted on The Week, which provided some important details about the loan product.   A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration (FHA) insured loan1 which enables you to access a portion of our home’s equity without having to make monthly mortgage payments2.

If you are 62 years of age or older and have sufficient home equity, you may be eligible for a reverse mortgage.  Here’s some additional information that can help determine if a reverse mortgage may be right for you.

What can the funds be used for? 

  • Pay off your existing mortgage3
  • Continue to live in your home and maintain the title2
  • Pay off medical bills, vehicle loans or other debts
  • Improve your monthly cash flow
  • Fund necessary home repairs or renovations
  • Build a “safety net” for unplanned expenses

What are some of the benefits?

  • Your existing monthly mortgage payment is eliminated4
  • You stay in your home and maintain the title4
  • Loan proceeds are not taxed as income or otherwise and can be
    used any way you choose5
  • Your loan is insured by the Federal Housing Administration (FHA)1

Who is Eligible?

To be eligible for a HECM loan, some key requirements are:

  • The youngest borrower must be at least 62 years of age
  • Your home must be your primary residence and have sufficient equity
  • You cannot be delinquent on any federal debt
  • Property must be a single family residence, an owner occupied 2-4 unit home, a condominium approved by the Department of Housing and Urban Development (HUD), or a manufactured home that meets FHA guidelines
  • Must meet financial assessment requirements as established by HUD

1 As required by the Federal Housing Administration (FHA), you will be charged an initial mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.

2 You 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.

3 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing.

4 Your current mortgage, if any, must be paid off using  the proceeds from your HECM loan. You must still 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.

5 Generally, money received is not considered income and should be tax free, though you must continue to pay required property taxes. Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.