If you are 62 years old
or older and own your own home you may want to consider a Reverse
Mortgage. A Reverse Mortgage, or Home Equity Conversion
Mortgage (HECM), essentially converts the equity in your home to
income. This income is in the form of monthly payments or a line
of credit. Unlike a conventional mortgage, a reverse mortgage is
not repaid monthly. The monthly income you have received is repaid
to the lender when you are no longer living in your home.
If you are interested
in an FHA Home Equity Conversion Mortgage, the FHA requires that
you first meet with a certified HUD counselor to discuss eligibility,
financial implications, alternatives, and repayment. It is important
to understand all aspects of a Reverse Mortgage to make a proper
decision both for your present circumstance and your future.
Several eligibility requirements
must be met in order to obtain a Reverse Mortgage. First, the borrower
must be 62 years of age or older. The home in question must be a
1- 4 unit home and the primary residence of the borrower. The mortgage
on the home must be substantially paid off. There are no income
or credit eligibility requirements. There will be a traditional
closing on a Reverse Mortgage; however closing costs can be incorporated
into the loan.
The amount you can borrow
with a Reverse Mortgage depends on the youngest borrower’s
age, the current interest rate, and value of your home or the FHA’s
mortgage limits in your area (whichever is lower). As a general
rule the older you are, the lower the interest rates, and the more
valuable your home, the more money you can borrow.
a Reverse Mortgage can be received in one of five ways. You can
choose from the following options; Tenure - monthly payments for
as long as at least on borrower remains in the home; Term - monthly
payments for a fixed period of time; Home Equity Line of Credit
– unscheduled payments and amounts distributed at times and
in amounts of your choosing, until the Line of Credit is depleted;
Modified Tenure – a combination of Line of Credit and Tenure
for as long as you are in your home; Modified Term – a combination
of Line of Credit and Term for the specified period of time.
Repayment of a Reverse
Mortgage begins when all borrowers are no longer using the home
as a primary residence. This is most often due to a move (such as
to a nursing home or assisted living) or death. At this time the
residence is most often sold and the full amount of the loan is
repaid from the sale.
If you believe that a
Home Equity Conversion Mortgage backed by the FHA is the right answer
to your fixed income, meet with a HUD counselor and make an informed