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What is a Reverse Mortgage?

What is a reverse mortgage?

Reverse mortgages are a type of home mortgage loan that basically lets you cash out a portion of the equity in your home into cash. The equity that has accumulated over years of payments can be paid back to you. However, unlike a home equity loan or second mortgage, no repayment is required until the borrower can no longer use the home as their principal residence.

To be eligible for a reverse mortgage, you must meet the following requirements:

  • Be at least 62 years of age
  • Own the property outright or have a small mortgage balance
  • Live in the property as your principal residence
  • Not be deliquent on any federal debt
  • Live in single family home, two to four unit home, townhouse, or approved condominium.

The mortgage amount will be based on:

  • Aget of the youngest borrower
  • Current interest rates
  • Appraised value or the FHA mortgage limit

You must also attend a HUD approved counseling session and continue to pay property taxes and homeowners insurance. There are several mortgage calculators available that can give you a reverse mortgage calculation.

Unlike ordinary home equity loans, a FHA reverse mortgage HECM does not require repayment as long as the home is your principal residence and the obligations of the mortgage are met. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to you or your heirs.

To get more information on the reverse mortgage process, visit the FHA website.

 

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