All About Reverse Mortgage

 
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What is a Reverse Mortgage? 
(The basics. Our free guide covers much more)

 
Reverse Mortgage loans are a way for older homeowners to convert their home's equity into tax-free cash, without having to sell or move. Insured by the U.S. government, FHA HECM Reverse Mortgage allows Homeowners who are 62 or older to borrow against the equity of their homes with no monthy payments required and the bank does not own the home.
 
Here’s how it works:
  • Qualifying homeowners can choose to receive tax-free payments from Reverse Mortgage lenders either on a monthly basis, in a lump sum, or as a line of credit or any combination of the above.
     
  • No repayments are required while a borrower(s) lives in the home.
     
  • Social Security and Medicare benefits are not affected.
     
  • Title to the home remains in the homeowners names. Homeowners stay in their home as long as they are able or want to and continue to make tax and insurance payments.
     
  • Reverse Mortgages are paid back only when the last borrower leaves the home, typically through the sale of the home by the heirs.
     
  • When the loan is paid in full, all remaining equity associated with the property will be distributed to your heirs.
     
  • Once the Reverse Mortgage closes, proceeds do not change due to negative economic reasons such as market downturn.
Keep in mind:
 
Reverse mortgage borrowers continue to own their homes. Because there are no monthly loan payments due, the amount owed grows over time. That means that the amount and the remaining equity in the home could decrease depending on the real estate market in Arizona.
 
Borrowers must continue to pay homeowner’s insurance and property taxes during the loan period. It is also the borrower’s responsibility to keep up with repairs.
 

 
Do I qualify for a reverse mortgage?
 
You must be age 62 or older. And you must occupy the home as your primary residence – for the majority of the year. Borrowers must own the home outright or have a low enough balance on the existing mortgage that it can be paid off from the proceeds of the reverse mortgage.
 
Each borrower listed on the title must apply for the reverse mortgage loan, attend a HUD counseling session and sign the loan papers. The HUD counseling is either handled in person, or over the telephone.

 
Does my home qualify for a reverse mortgage?
 
First of all, your residence must meet HUD guidlines. The reverse mortgage must also be the only mortgage held against the residence. That means that if there is a current mortgage on the property, it may be able to be paid off with the proceeds of the reverse mortgage. The home must be your primary residence.
 
Examples of qualifying homes:
 
  • Single Family One-Unit Residences
  • 2-4 Unit Owner-Occupied Residences
  • Manufatured Homes Built after 1976
  • FHA Approved Comdos
 
How is the loan amount determined?
 
The amount of the loan is based on:
  • The age of the youngest borrower
  • The appraised amount of the property.

 
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