Reverse Mortgage Basics
Reverse mortgage loans enable seniors to convert their home’s equity into tax free cash while retaining the ownership of their home.
Unlike a forward mortgage, there are no monthly payments to be made and repayment of the loan is deferred until the borrower is no longer living in the home.
When the loan becomes due it must be paid in full, including interest and financed closing costs. Since no monthly payments are made the amount owed grows over time and the equity that remains after selling the home and paying off the loan grows smaller.
With a reverse mortgage you will NEVER OWE MORE THAN YOUR HOME’S VALUE at the time the loan is repaid.
Borrowers still own their homes and are required to pay the property taxes, insurance and maintenance. Failure to carry out these responsibilities may be grounds for the loan to become due and payable in full.
A reverse mortgage must be the only mortgage on the property. Therefore, if there is an existing mortgage, it must be paid off with some of the proceeds from the reverse mortgage.
Reverse Mortgage Eligibility
- All borrower(s) must be 62 years of age and occupy the home as their primary residence the majority of the year.
- The borrower(s) must own the home outright or have a low enough balance that the existing mortgage can be paid off through the proceeds of the reverse mortgage.
- It is required that the borrower(s) attend a HUD Counseling Session. Counseling is done either face to face or by telephone, whichever is more convenient for the borrower(s).
- All individuals on title must apply for the reverse mortgage, attend counseling and sign the loan papers.
The following are eligible property types:
- Single Family One-Unit dwellings
- 2-4 Unit Owner Occupied dwellings
- Some Condominiums and Planned Unit Developments (please contact the lender for specifications)