Home equity conversion mortgages (HECMs) are federally-administered loans that many commonly refer to as reverse mortgages. The Department of Housing and Urban Development administers the Home Equity Conversion Mortgage, which may help retired homeowners 62 and older enhance their cash flow in retirement. For high-value properties (usually over $1,000,000 in value), private jumbo reverse mortgages1 may also be available in your area. Lenders that offer jumbo reverse mortgage loans differ in terms of their features and requirements.
How do I Qualify for a Reverse Mortgage Loan?
A reverse mortgage can be obtained if you own your home and you are 62 years of age or older. Home equity must be sufficient to cover any outstanding balances, and the house must be occupied as your primary residence. You must also meet certain income and credit requirements. If you lived in your home without a monthly mortgage payment2, you would instead enjoy the benefits from your home loan proceeds each month. Homeowners who are 62 years of age and older can obtain a reverse mortgage. Besides the freedom and comfort of your home you have known for so many years, you can access part of the value of your home. The home is yours, now you can use it to your advantage. Borrowers of reverse mortgages maintain ownership of their home2. As before, it’s still yours, but now you can take advantage of the equity you’ve built in your home over time. Additionally, HECM (Home Equity Conversion Mortgage) reverse mortgage loans provide peace of mind due to the fact that they are insured by the Federal Housing Administration (FHA); and the only assets that guarantee the loans are the home and property. When the reverse mortgage becomes due, the heirs can decide if they wish to retain the home by paying off the current outstanding loan balance or 95% of the home’s appraised value, less customary closing costs and real estate commissions. Once a reverse mortgage is taken out on your primary residence, repayment isn’t due until the home sells, the last borrower passes away, or the borrower permanently leaves2. To avoid defaulting on the loan, borrowers must also maintain the home in good condition, pay property taxes, and maintain homeowner’s insurance coverage. A reverse mortgage applicant must obtain counseling (from an independent, third-party counselor approved by HUD) before incurring any costs associated with the loan (other than the counseling fee). While reverse mortgage proceeds are not subject to personal income taxation, borrowers should seek tax advice on how they may affect government needs-based programs such as Medicaid and Medi-Cal.
Reverse Mortgage Facts
¹For these loan programs we are a Mortgage Broker only, not a mortgage lender or mortgage correspondent lender. We will arrange loans with third-party providers but do not make loans for these programs. We will not make mortgage loan commitments or fund mortgage loans under these programs.
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.
³Borrowers should seek professional tax advice regarding reverse mortgage proceeds.
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