Over the past century, the growth rate for the older population in the U.S. has rapidly increased. A recent profile of Americans reveals that in 2020, 55.7 million people were 65 and older. This represented 17% of the population and it’s expected that nearly a quarter of the nation is on pace to be part of the older population within the next 20 years.1 Couple this with senior housing wealth that continues to set records, $11.58 trillion in the second quarter of 20222, many homeowners may be planning to access this wealth with a reverse mortgage to supplement their retirement income, pay for home renovations, medical expenses, or help with daily living expenses.
A reverse mortgage loan, also known as a Home Equity Conversion Mortgage (HECM), is a Federal Housing Administration (FHA) insured loan3 that allows adults 62 and older to access a portion of their home equity without having to make monthly mortgage payments.4 Proceeds from the loan can be received in a lump sum, monthly payments, or as a line of credit. With a reverse mortgage, any existing mortgage balance is paid off5 using the proceeds from the reverse mortgage loan.
Key Features of a Reverse Mortgage
- With a HECM, the borrower doesn’t have to make any monthly mortgage payments.4
- Most of the closing costs and fees associated with a reverse mortgage loan can be financed into the loan, so out-of-pocket expenses are kept to a minimum.
- HECMs are available at fixed and adjustable rates, the line of credit option is only available through an adjustable-rate loan, and the lump sum option is only available with a fixed-rate loan.
- A line of credit gives the borrower the flexibility to use at it any time and in any amount until the line of credit is exhausted.
- A unique feature of a reverse mortgage is the line of credit growth rate. This means that the unused portion of the line of credit grows regardless of the home’s value.6
- Reverse mortgages are non-recourse loans that protect borrowers from ever having to pay back more than what the home is worth.
If you are interested in accessing your home’s equity with a reverse mortgage, call 800.976.6211 to speak with a licensed loan officer.
1 2021 Profile of Older Americans (acl.gov)
3 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.
4 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
5 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.
6 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.