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What is a Reverse Mortgage?

FHA Reverse Mortgage Loan Rates

A Reverse Mortgage, also known as a HECM (Home Equity Conversion Mortgage) is a financial tool that was created specifically for homeowners 62 years or older to allow them to:

  1. Payoff their current mortgage and continue to live in the home they love without ever having to make a monthly mortgage payment.
  2. Use any remaining tax-free money for anything.
  3. Allow them to afford and continue to own their own home.
  4. Pay their monthly bills and live more comfortably.
  5. Live a better retirement.

Unlike traditional home loans or second mortgages, there are currently no credit requirements to qualify for a reverse mortgage. The only requirements are that the home must be your primary residence, you must be at least 62 years old, and you must have sufficient equity in your home.

Your current loan (if you have one) will be paid off with your new reverse mortgage, totally eliminating any current mortgage payment you have! If there is money remaining after your mortgage is paid off, you get that money tax-free! If your home is paid off, you can use a Reverse Mortgage to access the equity that you have worked so hard to build.

As the homeowner(s), you can choose from one of four ways to receive the money from your reverse mortgage.

  1. As a monthly payment
  2. In one lump sum amount
  3. As a line of credit
  4. Any combination of the above

As a Reverse Mortgage borrower, you remain the owner of your home and remain on title. You are still responsible for property taxes, insurance and repairs. No repayment is required until you no longer occupy the house.

When the last borrower is no longer living in the home the entire balance of the Reverse Mortgage or the homes current value, whichever is lower, is the amount required to payoff the loan. If the home is worth less than the balance, the difference is paid by the FHA mortgage insurance fund. The HECM Reverse Mortgage is guaranteed by the FHA a department of HUD.

Guide to Understanding HUD Reverse Mortgages 

Whether it’s called a reverse mortgage, a home equity conversion mortgage, or simply an HECM, it’s the same thing. It refers to a program offered by the US Department of Housing and Urban Development (HUD), in which the Federal Housing Administration (FHA) insures loans for older Americans. Unlike a traditional home loan, borrowers are not required to have a specific credit score or deposit money down. Instead, the program enables seniors to draw upon their home equity. This provides a path to immediate financial stability for those who have paid into their homes over time but are without liquid assets in their golden years. Most seniors do this because they cannot afford daily living expenses, but want to live out their years in their existing home. However, there generally aren’t restrictions as to how the loan must be spent, so it’s also commonly used to:

  • Pay off an existing mortgage and continue to live in the home without making a monthly rent, loan, or mortgage payment.
  • Keep up with recurring monthly bills and live more comfortably.
  • Maintain standard of living or enjoy retirement more.
  • Make home repairs or remodel.

Who Can Apply

Qualifying for a HUD Reverse Mortgage is simple. Again, there are no credit score requirements, though applicants cannot be delinquent on any federal debts. Additional stipulations include that the individual must:

  1. Be age 62 or older
  2. Have only a small balance left on their present mortgage or own the home outright
  3. Plan to use the home as a primary residence

How it Works

In most cases, the loan is first applied to the original mortgage balance to zero it out. Once the mortgage is paid off, or if there wasn’t one to begin with, remaining funds go directly to the homeowner as tax-free cash to spend as he sees fit.

How Funds are Dispersed

There are three basic methods of payment. Homeowners can choose a single option or combine them in any form to suit their personal needs.

  1. As a single lump sum
  2. Monthly payments
  3. As a line of credit

You Should Know

Before you apply for a reverse mortgage, there are a few things you should know.

  • You will retain ownership of your home.
  • The amount you are able to borrow will vary depending on your age, but it cannot exceed a predetermined percent of the home’s value.
  • Although you won’t have to submit a monthly mortgage payment, you’re still responsible for taxes, insurance, and repairs.
  • You will not be required to repay any funds as long as you live in the home.

Paying Back the Loan

As long as you or a co-borrower reside in the home, no money is due. Upon your departure, the loan will come due. Because the loan is insured by the FHA, they pick up the difference if the home is worth less than you owe. If the value of the home has increased or maintained, you simply pay the full amount of the loan. Because you maintain ownership and hold the property title, you’re still able to leave the property to your heirs, though they will be responsible for closing out the loan.

We are HECM specialists. We also have authorization to inform you about HUD Reverse Mortgages. If you have questions that aren’t answered here or would like help navigating these government-sponsored programs, please let us know. We can be reached via our online form or you can speak directly with one of our knowledgeable representatives by calling 410-517-1930.

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    I had researched reverse mortgages and contacted a lender that was out of our area. When a friend recommended I call Reverse Mortgage loan Rates, I was amazed at the how much better their quote was. Their fees and interest rate were lower which resulted in more money available to me on a monthly basis to live a comfortable retirement. What a pleasant experience.
    James – Fairfax, VA
    My experience with Reverse Mortgage loan Rates on my reverse mortgage was exceptional. Even though my appraisal came in lower than expected, they were able to reduce some closing costs to make my deal work and get the cash I needed while I recuperated from surgery and return to work.
    Edward – Washington, DC
    Reverse Mortgage loan Rates saved my home from foreclosure after my husband’s unexpected death. They helped me settle an IRS lien on my home and avoid the foreclosure. I am very thankful for all they did for me.
    Elsie – Baltimore, MD
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