Do you have questions about reverse mortgages that need answers? If so, you’ve come to the right place!

We’ve got answers to some of the most commonly asked questions regarding reverse mortgages below…

What is a reverse mortgage?

A reverse mortgage allows homeowners aged 62 or older to obtain money from the equity in their homes. This money does not need to be paid back until the homeowner permanently vacates the home through the sale of the home, death or permanent relocation.

What is an HECM?

HECM stands for Home Equity Conversion Mortgage. This is a type of reverse mortgage that is regulated by the U.S. government through the Department of Housing and Urban Development (HUD). HECMs are insured through the Federal Housing Authority (FHA) and must abide by a stringent set of rules, including a requirement that all potential borrowers must undergo third-party counseling. The vast majority of reverse mortgages available today are HECMs.

How much money can I get with a reverse mortgage?

The amount of money a homeowner can receive from a reverse mortgage depends on a number of factors, including the age of the borrower(s), the value of the home and current interest rates as well as income, expenses and credit of the homeowner. Generally, the older the borrower and the lower the interest rates, the higher the amount that can be borrowed.

Do I have to have good credit to get a reverse mortgage?

Your credit is evaluated when you apply for a reverse mortgage, however even with less than perfect credit you can still qualify for a reverse mortgage.

What if I still have a mortgage or a home equity loan on my home?

When you get a reverse mortgage, it can be the only lien against your home. Therefore, if you still have an outstanding mortgage or home equity loan, the amount of the loan must be paid off in full before you get the reverse mortgage or as part of the initial payout. As long as the proceeds of the reverse mortgage are sufficient to pay off current debt and liens against your home a reverse mortgage may be a viable option.

Do I have options as to how I get my money from a reverse mortgage?

Borrowers can choose to get a lump-sum payment or can have regular monthly payments, either based on how long the homeowner is expected to live in the home (tenure) or for a fixed number of years (term). There is also an option to set up a reverse mortgage similar to a line of credit, in which the homeowner can just withdraw money when needed. Methods can be combined as well.

What is MIP?

MIP stands for mortgage insurance premium. This is an upfront cost associated with all reverse mortgage loans, regardless of lender. In addition to the upfront MIP, there is also an ongoing mortgage insurance premium assessed that is added onto the interest rate. For HECM loans, this amount is 1.25%.

Who owns my home if I get a reverse mortgage?

The homeowner retains full ownership of the home throughout the term of the reverse mortgage. The only exception to this is if the homeowner fails to keep up with tax and insurance payments or any associated costs of maintaining the home.

What happens to my home if I die?

If the borrower dies, or permanently moves out of the home, the reverse mortgage loan becomes due at that time. Most borrowers or their heirs will then sell the home to repay the loan. If this is done, the loan is considered to be repaid in full even if the sale price of the house is lower than the amount due on the home. If the sale price is higher than what is owed, the borrower or their heirs is entitled to any extra equity.

To discuss these and any other questions on reverse mortgages please call  1-800-827-1794

This material is not from HUD or FHA and has not been approved by HUD or a government agency.

As with any loan there are risks associated with a reverse mortgage.  The right to remain in your home is contingent on complying with reverse mortgage loan terms and it is possible to lose your home if you do not comply with the terms of the reverse mortgage such as keeping current with property taxes, insurance and maintenance costs.