Reverse mortgage loans are a way for older homeowners to convert their home's value into tax-free cash, without having to sell or move. Insured by the U.S. government, the Department of Housing and Urban Development (HUD) allows Homeowners who are 62 or older to borrow against the equity of their homes.
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.
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 equity may decrease
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. In fact, if a borrower fails to adhere to any of these obligations, it may become immediate cause for the loan to become due. In which case, it would become payable in full.
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 free HUD counseling session and sign the loan papers. The HUD counseling is either handled in person, or over the telephone.
First of all, your residence must meet HUD standards. 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 amount of the loan is based on:
HECM -- The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is insured by the Federal Housing Administration (FHA). The FHA guarantees that HECM lenders meet their obligations, governs how much HECM lenders may loan to qualified borrowers, and limiting loan costs. Because this is a government insured program, loan counseling is required, by an approved HUD counselor.
A reverse mortgage should be reviewed as a long-term housing and cash-flow decision, not just as a way to access equity. Western Ohio Mortgage works with homeowners and families across western Ohio who want to understand how a reverse mortgage may affect monthly cash flow, remaining home equity, heirs, taxes, insurance, and future plans for the property.
For many eligible homeowners, the first useful conversation is practical: who will remain in the home, how long the homeowner expects to stay, whether property taxes and homeowners insurance are current, and whether the home will continue to be maintained. Those details matter because reverse mortgage borrowers still have ongoing responsibilities after closing.
A reverse mortgage may be worth reviewing if the homeowner wants to stay in the home and needs more payment flexibility. It may not be the best fit when the homeowner expects to move soon, wants to preserve as much equity as possible for heirs, or does not have a stable plan for taxes, insurance, and maintenance.
Start with our common reverse mortgage questions and senior safeguards. Then talk with Western Ohio Mortgage about the numbers, counseling steps, and family considerations before making a decision.