You’ll find the answers to many common reverse mortgage questions here. Need to know more? Contact us. We’re happy to help.
What is a Home Equity Conversion Mortgage (HECM)?
What are the basic requirements for a reverse mortgage?
What if I still owe money on a first or second mortgage?
How can I receive the cash from a reverse mortgage?
How is a reverse mortgage different from a home equity loan?
Will I be taxed on my reverse mortgage proceeds?
Will a reverse mortgage affect my government benefits?
Can I use a reverse mortgage to purchase a home?
Are interest rates fixed or variable?
Can a reverse mortgage be refinanced?
What has to be repaid when the loan becomes due?
A HECM is a government-insured reverse mortgage. There are different HECM loans to choose from that offer you options on what interest rate you are charged, how much money you can access, and how you receive your payments.
With a home equity loan you must make monthly payments while you live in the home—with a reverse mortgage, you don't. Your reverse mortgage balance, including any accrued fees and interest, is repaid only after you permanently leave the home. Plus, with a reverse mortgage line of credit, your unused credit line actually grows each month—and the lender cannot “freeze” or reduce the line of credit. Eligible property types include single-family homes, 2-4 unit properties, manufactured homes, condominiums, and townhouses. Co-ops do not qualify.
Existing mortgages will be paid off with the proceeds from the reverse mortgage.
The specific amount depends on several factors, such as:
Your Age
Type of reverse mortgage you select
Current interest rates
Appraised value of your home
Federal Housing Administration (FHA) lending limits
HUD also regulates the amount of money that can be withdrawn during the first year of your reverse mortgage.
You have a number of choices for how you receive your funds:
Lump sum
Monthly payments (for a fixed length of time or as long as you remain in the home)
Line of credit (take funds when you need them)
A combination of the above
With a home equity loan you must make monthly payments while you live in the home—with a reverse mortgage, you don't. Your reverse mortgage balance, including any accrued fees and interest, is repaid only after you permanently leave the home. Plus, with a reverse mortgage line of credit, your unused credit line actually grows each month—and the lender cannot “freeze” or reduce the line of credit.
Typically, reverse mortgages are not taxable. Contact your tax advisor for additional details.
The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits. However, needs-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be impacted. One of our reverse mortgage consultants can provide additional general information, but you should contact a tax professional about your particular situation.
Use the proceeds for the things you need and want—paying monthly bills, fixing up your home, paying for prescriptions and health care, making a major purchase, traveling, helping children or grandchildren, planning for the unexpected, and more.
Yes, with the HECM for purchase reverse mortgage loan, qualified homeowners can use their loan proceeds to purchase a home, such as one that better suits their needs physically or geographically. The home purchase and reverse mortgage can be handled in one transaction.
Reverse mortgages are available with either fixed or variable rates. Fixed-rate reverse mortgages give you the comfort of knowing that your interest rate won’t change.
Yes, refinancing is possible. This option can be to your advantage if your home increases in value, making more cash available.
Most of the fees associated with a reverse mortgage—such as an origination fee, closing costs, a mortgage insurance premium, and a monthly servicing fee—can be financed with your reverse mortgage so there’s no immediate burden to you. The costs are added to the principal and paid along with the interest accrued on the total principal balance when the loan becomes due.
You’ll repay the loan balance, any fees that have been added, and the accrued interest on the total principal balance. Homeowners (or their heirs) usually choose to do this through the sale of the house or other assets. Repaying the reverse mortgage through a conventional mortgage is also an option.
The reverse mortgage loan must be paid in full when one of the following occurs:
A maturity event occurs, such as the borrower passes away, the home is no longer the borrower’s principle residence, or the borrower vacates the property for more than 12 months due to mental of physical illness
You fail to pay property taxes or insurance
You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problem
The surviving borrower continues to own and live in the home—and enjoy all the benefits of a reverse mortgage.