Reverse Mortgages
How Do You Qualify
For A Reverse Mortgage?
It can be scary making a major decision about one of your biggest investments, the place that means the most to you. My goal is that you become fully informed and make the appropriate decision for you and your family, given your unique situation.
The basic requirements
- At least one borrower on title must be 62 or older (in Texas, both borrowers must be 62 when the loan closes)
- The home must be your primary residence for at least 6 months of every year
- You need sufficient equity. As a general rule of thumb, aim for at least 50% equity in your home
- You complete a financial assessment of your capacity to meet loan obligations like taxes and insurance
You do not need to pay off your home to qualify for a reverse mortgage loan.
Types Of Reverse Mortgage Loans
Two popular options
The two most popular are the HECM loan and jumbo or proprietary reverse mortgage loans for high value homes.
HECM (Home Equity Conversion Mortgage)
The most popular reverse mortgage, insured by the Federal Housing Administration (FHA) and supervised by HUD. HECMs have unique eligibility requirements and guarantees.
Explore the HECM loanBuying a home with a HECM
Jumbo or proprietary reverse mortgage
Private reverse mortgage loans for high value homes. They offer access to your home equity with no required monthly payments as well, albeit with different terms and conditions set by the lender.
Explore jumbo reverse mortgagesI am a reverse mortgage loan specialist and am here to assist you as you explore your options and decide whether a reverse mortgage loan is right for you. I aim to provide world class service from start to finish.
Key features of the reverse mortgage loan
A reverse mortgage allows homeowners 62 and older to draw on the value of their home, paid out in a variety of payout options or used as a line of credit.
No required monthly mortgage payments2
While you will still need to pay property taxes and insurance and maintain the property, no monthly mortgage payments are required.
Multiple payout options
Convert your home's equity to support your financial goals by receiving monthly payments, receiving a lump sum, or growing a line of credit over time.
Proceeds are typically tax free
Proceeds you receive from a reverse mortgage loan are typically tax free, however, you will need to consult your tax advisor for tax advice.
Borrower protections
A limit on the equity you can access in the first year and a financial assessment help reduce the risk of foreclosure. A non-borrowing spouse under 62 may remain in the home if the borrowing spouse passes away or permanently leaves, as long as they comply with the loan terms.
A line of credit that can grow
If you access your equity via a line of credit, interest only accrues on funds that are used. Funds that are not used will increase over time at the same rate of your loan, growing the cash you have access to later in retirement.
Non-recourse protection
The FHA HECM loan is a non-recourse loan. If your home sells for less than the loan balance, your heirs are not liable for the debt. Only the funds received from the sale of the home can be used to repay the loan.
Get A No Obligation
Evaluation And Quote
Find out what you may qualify for with a reverse mortgage evaluation and quote today.
Options For Receiving Loan Proceeds
Five ways to receive your money
Adjustable interest rate reverse mortgage loan payments can be received in one of five ways.1
Tenure
Equal monthly payments.
Term
Equal monthly payments for a fixed period of months as decided by the borrower.
Line of Credit
Payments made in installments or at various times and in amounts dictated by the borrower(s).
Modified Tenure
Monthly payments with a line of credit.
Modified Term
Monthly payments for a fixed period of months with a line of credit.
How much could I receive?
The cash you can potentially receive is based on the age of the youngest borrower, the current expected interest rate, the mortgage option selected, and the appraised value of the home. For instance, an older individual with a higher value home typically will be eligible for more than a younger person with the same home value at the same expected interest rate. How much money you can take in the first year is limited. For more information on distribution limits, visit my FAQs page.
More about reverse mortgages
Straight answers to the questions homeowners and families ask most.
What types of homes are eligible?
Homes that are eligible for a reverse mortgage loan include single-family homes, detached homes, townhouses, and two-to-four unit properties that are owner-occupied. Condominiums must be FHA-approved for the HECM loan, and some manufactured homes are also eligible. Contact me for more details on manufactured home eligibility.
Will I have to repay the lender if I outlive the loan?
If you outlive the loan, you will not have to repay the lender if you have a HECM loan. As long as one of the borrowers on the loan note (or original non-borrowing spouse) lives in the home, continues to pay the taxes and insurance, maintains the home in good condition, and complies with the loan terms, you will not need to repay the loan.
Once the last surviving borrower passes away (and any non-borrowing spouse), the home is sold, or the obligations of the loan are not met, the loan must be repaid.
How will this loan affect my estate, and how much will be left to my heirs?
With a HECM, once the last surviving borrower dies, sells the home, or no longer resides there as the primary residence, you or your estate is responsible for the repayment of the money you received from the reverse mortgage loan, plus interest and other fees. Any remaining equity belongs to either you or your heirs.
A non-recourse clause prevents either you or your estate from being responsible for more than the value of your home when the loan is repaid. If the ending loan balance exceeds the home's value, the estate (heirs) can sign a deed in lieu of foreclosure releasing the property, or pay 95% of the home's appraised value, less customary closing costs and real estate commissions.
Should I use an estate planning service to find a reverse mortgage loan?
HUD advises against using any service that charges a fee (except required HECM counseling) or any service that requests a lender referral fee to obtain a reverse mortgage loan. HUD provides this information free of charge and can direct you to HUD-approved housing agencies that offer approved reverse mortgage loan counseling or additional services that are free or have a minimal cost.
How much does counseling cost?
There is typically a reverse mortgage loan (HECM) counseling fee that ranges from $125 to $150. If the borrower cannot afford this fee, some counseling agencies will waive the fee for qualified applicants. You can find a HUD-approved housing counseling agency near you by calling 1-800-569-4287 toll free.
How is a reverse mortgage different from a home equity line of credit?
Reverse mortgage loans are unique because they allow the borrower to receive loan proceeds that do not require immediate repayment as long as you remain in your home as your primary residence, do not sell your home, at least one borrower lives in the home, you meet the basic income and credit standards, and you follow loan guidelines.
On the other hand, obtaining a home equity loan (or home equity line of credit or second mortgage) requires that you have sufficient income to cover the debt, plus you must continue to make monthly principal and interest mortgage payments. With a reverse mortgage loan, you must meet basic income and credit guidelines, but you do not make monthly principal and interest payments. Keep in mind you must continue to pay all property related fees, taxes, and homeowner's insurance and maintain the property in good condition.
History Of Reverse Mortgage Loans
A product that has evolved
The origins and history of reverse mortgage loans reveal a loan product that has evolved dramatically over the last 40 years.
The first reverse mortgage
Nelson Haynes of Deering Savings & Loan (Portland, Maine) wrote the first reverse mortgage loan to Nellie Young, the widow of his high school football coach, helping her stay in her home despite the loss of her husband's income.
Private banks step in
Several private banks offered reverse mortgage style loans. These programs gave seniors money from their home but did not afford the protections of today, since no FHA insurance had been put in place.
A call for standards
The U.S. Senate Special Committee on Aging issued a report stating the need for a standardized reverse mortgage loan program. Other committees cited the need for FHA insurance and uniform lending practices.
FHA insurance becomes law
In late 1987, Congress passed the FHA insurance bill that would insure reverse mortgage loans. On February 5, 1988, President Ronald Reagan signed the FHA Reverse Mortgage loan bill into law.
The first HECM
The first FHA insured HECM was made to Marjorie Mason of Fairway, Kansas, by the James B Nutter Co. Since 1989, reverse mortgage loans have grown in popularity, especially in the mid to late 1990s.
Let's Find Out If It's
Right For You
I'll talk you through each step of the process and answer any and all questions you may have.
1HECM fixed interest rate mortgages are limited to the Single Disbursement Lump Sum payment option, which is one full draw at loan closing and no future draws. Adjustable interest rate mortgages provide for five flexible payment options and allow for future draws. Initial distribution caps will apply.
2There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower is still responsible for paying property taxes, homeowner's insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.
This advertisement does not constitute financial advice. Please consult a financial advisor regarding your specific situation. Borrowers should seek professional tax advice regarding reverse mortgage loan proceeds.
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