Is a Reverse Mortgage right for you?
A Reverse Mortgage, also know as an FHA Home Equity Conversion Mortgage (HECM), is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.
However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage loan terms.
You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
You may apply for a HECM regardless of whether or not you purchased your home with an FHA-insured mortgage.
When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid. All proceeds beyond the amount owed belong to you, your spouse or estate. This means any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.
The amount you can borrow varies by borrower and depends on: the age of the youngest borrower or eligible non-borrowing spouse; current interest rates; and the lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price.
If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
Reverse Mortgage FAQ’s
Payment Plans Include:
– equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
– equal monthly payments for a fixed period of months selected.
Line of Credit
– unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
– combination of line of credit and scheduled monthly payments for as long as you remain in the home.
– combination of line of credit plus monthly payments for a fixed period of months selected by the borrower. For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
Single Disbursement Lump Sum
– a single lump sum disbursement at mortgage closing.