Reverse Mortgage

Secure Your Retirement With a Reverse Mortgage

If you have enough equity in your house, you may get a reverse mortgage and use the funds for practically any purpose. While you could use the money to spend your retirement years more comfortably, you may also use it to buy a car, explore the world, or take expensive classes.

What sets reverse mortgages apart from conventional mortgages is that you don’t need to make any monthly payments. Instead, you receive money from your lender. The only type of reverse mortgage that the Federal Housing Administration (FHA) insures is the Home Equity Conversion Mortgage (HECM), qualifying for which requires meeting specific criteria.

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Eligibility

You might be eligible for a HECM if you meet these requirements:

You are 62 years of age or older
You use the home you wish to mortgage as your primary residence
The home adheres to FHA standards

Qualifying for a HECM requires that you have at least 50% equity in your home. People who still need to pay off their existing mortgages might also qualify for reverse mortgages. They may then use the proceeds from their reverse mortgages to pay off their existing mortgages. Once you get a reverse mortgage, you still need to keep paying property taxes, homeowner association fees, insurance premiums, and other applicable costs.

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Maximum Loan Amount

The most you may borrow through a HECM depends on the following:

The youngest borrower’s age
The appraised value of your home and FHA limits (lower of the two)
Prevailing interest rates

The maximum limit set by FHA for 2023 is $1,089,300. Typically, older applicants tend to qualify for higher amounts. Low interest rates also tend to make way for larger loan amounts. Bear in mind that there might be restrictions on how much money you may access during the first year.

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How a Reverse Mortgage Culminates

Your reverse mortgage becomes due (and payable) upon your passing away, if you stop using the home as your primary residence, if you don’t stay at the home for 12 months in a row owing to medical problems, or if you violate the terms and conditions of the mortgage.

Sell the Home

You, your heirs, or your estate may choose to sell the home and repay the amount owed toward the reverse mortgage. Heirs typically get up to six months after your demise to decide if they wish to sell the home. After this stage, the lender initiates proceedings to take over the property.

Sign It Over to the Lender

Upon your passing away, your heirs have the option of refinancing your mortgage or signing over the home to the lender. In case of the latter, the lender recovers what’s due by selling the home. If the amount received by selling the home exceeds the loan’s outstanding balance, the remainder goes to the borrower’s heirs.

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WANT TO CONVERT YOUR HOME EQUITY TO CASH?

DISCUSS YOUR UNIQUE REQUIREMENTS WITH OUR REVERSE MORTGAGE SPECIALISTS AND COUNT ON THEM TO GUIDE YOU IN THE RIGHT DIRECTION.

Guide for First-Time Homebuyers

If you plan to buy a home but don’t know how to go about the process, consider going through our in-depth guide for first-time homebuyers.