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Everything You Need To Know About Reverse Mortgages

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What exactly do you need to know about Reverse Mortgages? This loan program is a great program that allows Seniors to age in place without having the need to make monthly payments by turning a portion of the equity in their home into cash. While there are a growing number of individuals  that are learning about the existence of the reverse mortgage loan program, not many people are sure what it is or how it works. But don’t worry, we make it easy for you in our handy guide of “Everything You Need to Know About Reverse Mortgages.

What You Need to Know About Reverse Mortgages

Basic Info

  • A reverse mortgage is also known as a Home Equity Conversion Loan, which can be shortened to HECM (pronounced heck-um).

  • Most reverse mortgages are Federal Housing Administration (FHA) loans, however, there are also private reverse mortgage loans available.

  • Under FHA’s guidelines, borrowers are required to attend a reverse mortgage counseling session. Borrowers have an option to meet with a counselor or do their counseling session over the phone.

    • At the counseling session, the counselors will go over the program to make sure that the borrowers understand and are aware of their responsibilities to the loan.

  • With a reverse mortgage loan, your home continues to belong to you and not the bank.

  • A reverse mortgage is a “non-recourse loan.” This means that you or your heirs will never have to owe more than the house is worth.

  • A reverse mortgage loan will not affect your Social Security or Medicare benefits. However, Medicaid and other government assistance programs may be affected. It is important to contact with a specialist regarding your benefits if you have further questions.

  • With a reverse mortgage loan – borrowers are able to use the money in any way that they please. Because it is their money, borrowers have used their funds to help pay for vacations to pay off their mortgages. A reverse mortgage loan is there to help seniors age comfortably and worry-free during their retirement years.

  • All money received from a Reverse Mortgage is tax-free.

  • If you have a mortgage on the property, you may still be able to qualify for the reverse mortgage loan and you are able to use your reverse mortgage funds to pay off the rest of the mortgage.


To be able to obtain a reverse mortgage loans, there are certain qualifications that borrowers must meet.

  • At least one of the borrowers must be 62 years of age or older. 

  • The home in question must be the primary residence of the borrowers.

  • There must be substantial equity in the home, in order for the loan to make sense.

Borrower’s Responsibilities

Before a borrower takes on a reverse mortgage loan, they must understand what their responsibilities are with the lender. If they no longer are able to keep up with their responsibilities, the loan may go into repayment status. If that is the case, the borrower or their heirs can opt to work with the bank to help refinance the loan.

  • Borrowers must continue to live in the home as their primary residence. If they must leave the home for hospitalization or other reasons, they have up to 12 consecutive months before the loan becomes due.

  • Borrowers must continue to pay property taxes and home insurance.This rule is no different than the requirements of a traditional mortgage.

  • Borrowers must maintain the property to FHA’s standards. Borrowers may use their reverse mortgage funds to help pay for remodeling or repair on the home.

How is loan determined:

How much a borrower can receive is determined by three important factors, which will determine how much of the equity it will turn into cash:

  • The age of the youngest borrower. (Must be at least 62 years old)

  • The appraised value of the home

  • The current interest rate on the loan.

*Note that FHA set a cap off $625,500 on reverse mortgage loans.

How to access your funds:

Another benefit of a reverse mortgage loan is that borrowers can choose how they would like to receive their money. Here are the options available:

  • Limited lump sum

  • Access to line of credit

  • Monthly payments

  • Any combination of the above three options.

Interested in doing a reverse mortgage? Start your application process today by calling 1-888-808-8486!

Read Related Articles:

The Quick Guide to Reverse Mortgages

Top 5 Questions Asked About Reverse Mortgages

Image courtesy of [hyenda reality] / FreeDigitalPhotos.net

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