Reverse Mortgages are becoming popular in America. The U.S. Department of
Housing and Urban Development (HUD) created one of the first. HUD's Reverse
Mortgage is a federally-insured private loan, and it's a safe plan that can give
older Americans greater financial security. Many seniors use it to supplement
social security, meet unexpected medical expenses, make home improvements, and
more. Since your home is probably your largest single investment, it's smart to
know more about reverse mortgages, and decide if one is right for you!1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner
convert a portion of the equity in his or her home into cash. The equity built
up over years of home mortgage payments can be paid to you. But unlike a
traditional home equity loan or second mortgage, no repayment is required until
the borrower(s) no longer use the home as their principal residence. HUD's
reverse mortgage provides these benefits, and it is federally-insured as well.
2. Can I qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD's Federal Housing
Administration (FHA) requires that the borrower is a homeowner, 62 years of age
or older; own your home outright, or have a low mortgage balance that can be
paid off at the closing with proceeds from the reverse loan; and must live in
the home. You are further required to receive consumer information from
HUD-approved counseling sources prior to obtaining the loan.
3. Can I apply if I didn't buy my present house with FHA mortgage
insurance?
Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage.
Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
4. What types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property
that you own and occupy. Townhouses, detached homes, units in condominiums and
some manufactured homes are eligible. Condominiums must be FHA-approved. It is
possible for individual condominiums units to qualify under the Spot Loan
program.
5. What's the difference between a reverse mortgage and a bank home equity
loan?
With a traditional second mortgage, or a home equity line of credit, you must
have sufficient income versus debt ratio to qualify for the loan, and you are
required to make monthly mortgage payments. The reverse mortgage is different in
that it pays you, and is available regardless of your current income. The amount
you can borrow depends on your age, the current interest rate, and the appraised
value of your home or FHA's mortgage limits for your area, whichever is less.
Generally, the more valuable your home is, the older you are, the lower the
interest, the more you can borrow. You don't make payments, because the loan is
not due as long as the house is your principal residence. Like all homeowners,
you still are required to pay your real estate taxes and other conventional
payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you
cannot be foreclosed or forced to vacate your house because you "missed your
mortgage payment."
6. Can the lender take my home away if I outlive the loan?
No! You do not need to repay the loan as long as you or one of the borrowers
continues to live in the house and keeps the taxes and insurance current. You
can never owe more than your home's value.
7. Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you
or your estate will repay the cash you received from the reverse mortgage, plus
interest and other fees, to the lender. The remaining equity in your home, if
any, belongs to you or to your heirs. None of your other assets will be affected
by HUD's reverse mortgage loan. This debt will never be passed along to the
estate or heirs.
8. How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, and
the appraised value of your home or FHA's mortgage limits for your area,
whichever is less. Generally, the more valuable your home is, the older you are,
the lower the interest, the more you can borrow.
9. Should I use an estate planning service to find a reverse mortgage?
I've been contacted by a firm that will give me the name of a lender for a
"small percentage" of the loan? HUD does NOT recommend using an estate planning
service, or any service that charges a fee just for referring a borrower to a
lender! HUD provides this information without cost, and HUD-approved housing
counseling agencies are available for free, or at minimal cost, to provide
information, counseling, and free referral to a list of HUD-approved lenders.
10. How do I receive my payments?
You have five options:
- Tenure - equal monthly payments as long as at least one borrower lives and
continues to occupy the property as a principal residence.
- Term - equal monthly payments for a fixed period of months selected.
- Line of Credit - unscheduled payments or in installments, at times and in
amounts of borrower's choosing until the line of credit is exhausted.
- Modified Tenure - combination of line of credit with monthly payments for
as long as the borrower remains in the home.
- Modified Term - combination of line of credit with monthly payments for a
fixed period of months selected by the borrower.
*LET US SEE IF YOU QUALIFY!!!
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