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By: mario_williams6 | April 12, 2016

1. What is a reverse mortgage?


A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA’s HECM provides these benefits. 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.


2. Can I qualify for FHA’s HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.


 


3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured. You can get a detailed explanation here: http://reversemortgagealert.org/introduction/


4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.  You can also have a duplex if one unit is occupied by the borrower.


5. What’s the difference between a reverse mortgage and a bank home equity loan?


With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.  By using our Reverse Mortgage calculators we can give you determine the amount that you can receive.

You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”


6. Can the lender take my home away from me?


No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current and maintains the property.


7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.


8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.9. Should I use an estate planning service to find a reverse mortgage?

We do NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. We provide this information and HECM housing counselors are available for free or at very low cost, to provide information and counseling for you.  We have contacts that you can call from your own home to complete the counseling requirement.


9. Should I use an estate planning service to find a reverse mortgage?

We do NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. We provide this information and HECM housing counselors are available for free or at very low cost, to provide information and counseling for you.  We have contacts that you can call from your own home to complete the counseling requirement.


10. How do I receive my payments?

You have five options with a HECM Variable rate loan.

Tenure – equal monthly payments as  long as at least one borrower lives and continues to occupy the property  as a principal residence.

Term – equal monthly payments for a  fixed period of months selected.

Line of Credit – unscheduled payments  or installments, at times and in amounts of your choosing until the line  of credit is exhausted.

Modified Tenure – combination of line  of credit with monthly payments for as long as you remain in the home.

Modified Term – combination of line of  credit plus monthly payments for a fixed period of months selected by the  borrower.

You have one option with a HECM fixed rate loan.

Right now we find that over 90% of Reverse Mortgages are using the HECM  fixed rate loan.  This has a lot to do with the economy and what has happened to the variable rates the last few years.  On this option you have to take the money out lump sum.  You can put this into any savings plan and take the money out monthly as you need it.

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