Top 5 Reverse Mortgage Questions

Seniors that are considering a reverse mortgage can become inundated with tons of information. Here are some of the most common questions that a borrower can have about reverse mortgages:

 

1. What is HECM?

HECM (pronounced HECK-UM) stands for Home Equity Conversion Mortgage, and is often referred to as a reverse mortgage. HECM is the Housing and Urban Development’s (HUD) official reverse mortgage product and is insured by the Federal Housing Association (FHA). This loan allows senior homeowners, age 62 years and older to turn the equity in their home into cash without being required to make monthly payments.

2. What are the requirements to qualify for a reverse mortgage?

Homeowners who are interested in obtaining a reverse mortgage must meet the following requirements:

1. At least one of the borrowers must be at least 62 years old, but loan proceeds will be done based on the age of the younger homeowner.
2. Must be the homeowner’s primary residence.
3. There must be sufficient equity in the home.

Use this Reverse Mortgage Calculator to help determine your eligibility.

*At this time, there are no credit score or income requirement for the borrower(s).

3. Who owns my home?

Contrary to popular belief, the bank does not own the borrowers’ home if they choose to take out a reverse mortgage. Because they are borrowing against the equity built up in their home, the borrower(s) continues to hold title and ownership to the home.

4. When is the reverse mortgage the loan due?

Unlike most loans, borrowers are not required to repay their reverse mortgage as long as they continue to live in the home as their permanent residence and keep up with their obligations to the lender. Borrowers are responsible for keeping the payments for the home insurance and taxes up-to-date and maintain the physical integrity of the home. The loan will come due when the last borrower on title either moves out of the home permanently or passes.

5. What is the difference between a home equity loan and a reverse mortgage?

While both loans convert the equity that you have built up in your home into cash, these loans are not the same. One of the biggest differences between a reverse mortgage loan and a home equity loan is that borrowers are not required to make monthly payments on their reverse mortgage loans. At this time, there are no credit score requirement or income verification when getting a reverse mortgage loan. (According to HUD, financial assessments will be required beginning January 13, 2014) With the home equity loan, borrowers are required to make monthly payments and have to go through a credit score and income check for eligibility purposes.

If you have any more questions regarding reverse mortgages, you can speak with an advisor at 1-888-808-8486. Also, please feel free to leave us a message and we will get back to you as soon as possible.

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About the Author:

I have been working in the reverse mortgage industry for 20-plus years. My goal is to provide consumers the most up-to-date and relevant information about the reverse mortgage industry and how it can affect them.

Thanks for reading!

-Alan F.