How Does a Reverse Mortgage Work?

How does a reverse mortgage work?

A reverse mortgage is a FHA-approved loan program meant specifically to assist homeowners who are at least 62 years and older to age in place comfortably without having the need to make additional payments every month. They are able to turn a part of the equity in their home into cash that they are able to use in any way that they choose.

Those who are 62 years and older can qualify for a reverse mortgage loan, as long as the home belongs to them and there is substantial equity in the home. Prior to beginning the application program, potential borrowers must meet with HUD-approved HECM (Home Equity Conversion Mortgage) counselors in order to determine if this is the right option for them. At the counseling session, their counselors explain the program to them, and outlines the conditions of the the reverse mortgage loan.

Borrowers must be aware of the conditions of the reverse mortgage loan in order to understand when the loan must be paid back since borrowers are not mandated to make payments. If you have a reverse mortgage, you must remain in the home as your primary residence, keep up with the payments on insurance and keep up with the maintenance of home according to FHA’s guidelines.

The lender calculates the cost of what the borrower(s) will receive from the reverse mortgage loan, using the following factors: the age of the youngest borrower (must be at least 62 years old), the appraised value of the home and the lending limit.

Reverse mortgages are also non-recourse loans, which means that you do not have to worry about your children or heirs paying more than the home is worth.

If you have any questions about the Reverse Mortgage process or how it can work for you, give us a call today at 1-888-808-8486.

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