While doing your research about a reverse mortgage loan, you may have seen terms like “government-insured” or “FHA-approved” and wondered what the government has to do with the loan. The only reverse mortgage loan insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM) and is only available through a Federal Housing Administration (FHA)-approved lender.1
What are the benefits of Federally Insured Reverse Mortgage Loans?
Homeowners who are 62 years and older may benefit from a reverse mortgage loan by tapping into their home equity and using the proceeds to help supplement their retirement.
No Monthly Mortgage Payments2
If you still have a mortgage on your home, it must be paid off using the proceeds from the HECM loan. If you don’t have a current mortgage, it increases the amount of money you may be eligible to receive. You will need to reside in the home as your primary residence, continue to pay the required property taxes and homeowner’s insurance and maintain the home according to FHA requirements.
A HECM is a non-recourse loan, meaning the borrower will never have to repay more than the value of the home when the loan becomes due.
Funds are Guaranteed
If the housing market conditions decline, any funds in a line of credit or monthly disbursements will never be reduced.
Benefits of Department of Housing and Urban Development (HUD) Oversight
HUD has implemented rules to ensure that borrowers who take out a HECM reverse mortgage are well informed and understand their options. All borrowers are required to complete a counseling session with a HUD-approved counselor before moving forward with a reverse mortgage. The counseling ensures borrowers receive unbiased information and guidance to help determine if a HECM loan is right for them.
In addition to counseling, HUD is responsible for ensuring that the regulations they set are being followed by lenders. Lenders who do not abide by the rules often see their license to fund federally insured HECM loans revoked.
If you are looking for an extra source of funds in retirement, an FHA insured reverse mortgage may be able to help. Call 1.800.976.6211 or fill out the calculator above.
2 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. 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.