What’s a Reverse Mortgage?
A Home Equity Conversion Mortgage, (HECM), commonly known as a reverse mortgage loan, is a Federal Housing Administration (FHA) insured loan1 which allows you to access a portion of your home’s equity without having to make monthly mortgage payments.2 If you are at least 62 years old and have sufficient equity in your home, you may be able to get the cash you need.
One benefit of a HECM is there are no monthly mortgage payments.2 If you still have a mortgage on your home, it must be paid off using the proceeds from your reverse mortgage loan. If you don’t have a current mortgage, it increases the amount of money you may be eligible to receive.
What are Your Responsibilities with a Reverse Mortgage?
An important part of the reverse mortgage process, which is required before proceeding with the loan, is a counseling session with a Department of Housing and Urban Development (HUD) approved counselor. This mandatory counseling ensures you understand the obligations2 that come with the loan.
Some of the key responsibilities that will be discussed include continuing to reside in the home as your primary residence, paying the required property taxes and homeowner’s insurance, and maintaining the home according to FHA requirements.
Can I Lose My Home to Foreclosure?
Yes, foreclosure can happen as with any mortgage (conventional or reverse). However, to reduce the possibility of seniors defaulting on their reverse mortgage loan, in 2015 the Financial Assessment regulation was introduced.3 Lenders must determine your ability to meet ongoing tax and insurance obligations by reviewing your credit and housing history in order to detect any potential financial issues.
Below are specific situations where failure to meet these requirements may trigger a reverse mortgage to become due and payable:
- You no longer live in your home as your primary residence.
- You move or sell your home.
- You are away from your home for more than six months of the year for non-medical reasons.
- You are away from your home for more than 12 consecutive months.
- You pass away and your spouse or partner is not listed on the loan as a co-borrower or non-borrowing spouse.
- You stop paying property taxes and homeowner’s insurance.
- You don’t maintain the home according to FHA requirements.
If you are interested in learning more about a reverse mortgage and if it may benefit you, call 1 (800) 976-6211 to speak with a licensed loan advisor for a free, personalized loan assessment to discover your options.
Disclosures:
1 As required by the Federal Housing Administration (FHA), you will be charged an up-front 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 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.
3 https://www.newviewadvisors.com/commentary/financial-assessment-is-working-part-iii/