| 1. What is a Reverse Mortgage? |
A reverse mortgage is a federally-insured home loan that lets a homeowner convert a portion of the equity in his or her home into cash without selling the home. Unlike a traditional home equity loan or second mortgage, no payment is required until the borrower(s) no longer use the home as their principle residence.
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| 2. Can I qualify for a reverse mortgage? |
To be eligible for a reverse mortgage, the borrower(s) is required to be a homeowner aged 62 years or older, living in the home as a primary residence. The borrower must own the home outright, or have a mortgage balance that can be paid off at the closing with the proceeds from the reverse mortgage loan. All borrowers must also complete a HUD approved consumer counseling program prior to obtaining the loan.
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| 3. Can I apply even if I did not buy my present home with an FHA mortgage? |
Yes, you can. It does not matter what type of loan you used to purchase your home. Your reverse mortgage will be a new, FHA-insured mortgage loan.
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| 4. What types of homes are eligible? |
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhomes, detached homes, units in FHA approved condominiums and some manufactured homes are also eligible.
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| 5. What’s the difference between a reverse mortgage and a second mortgage or home equity loan? |
With a traditional second mortgage, or a home equity line of credit, you must meet income and credit requirements for the loan and you must make monthly mortgage payments. A reverse mortgage doesn’t have these requirements. The amount you can borrow depends on your age, the current interest rate, and the value of your home. No payments are due as long as the house is your principle residence.
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| 6. Can the lender take your home away? |
Since a reverse mortgage does not require monthly payments, you will not be foreclosed or forced to vacate your house because you “missed your mortgage payment.” You do not need to repay the loan as long as you (or your co-borrower) continue to live in the house, and you must keep current with payment for taxes and insurance.
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| 7. Will I still have an estate that I can leave to my heirs? |
When you sell your home or no longer use it as your primary residence, you or your estate will repay the reverse mortgage loan, plus interest and other fees to the lender. Any remaining equity in your home belongs to you or to your heirs.
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| 8. How much money can I get from my home? |
The amount you can borrow depends on your age, current interest rates, and the appraised value of your home or FHA’s lending limits in your area, whichever is less. Talk with your Reverse Mortgage specialist for an estimate of the funds available to your through a reverse mortgage.
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| 9. Should I use an estate planning service to find a reverse mortgage? |
You may have be contacted by a firm offering to match you with a lender for a “small percentage” of the loan. This is not necessary. HUD does not recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! Information, referrals and counseling are all available to you for free.
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| 10. How do I receive my money? |
You have several options for how you receive the money from your reverse mortgage. You can take a lump sum at closing, set up equal payments for a set period of time, use the loan like a line of credit to draw payments when needed, or a combination of these. |
