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What is a Reverse Mortgage?

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Reverse Mortgages, also known as Home Equity Conversion Mortgages (HECM) are FHA federally insured home loans that provides senior homeowners, 62 years and older, the opportunity to convert part of their home's equity into tax-free money. With the rising financial requirements of senior homeowners, it is clear why reverse mortgages are becoming a popular option and tool to supplement retirement.

The Home Equity Conversion Mortgage loan is the oldest and most common reverse mortgage for homeowners age 62 years of age and older. It is insured by the Federal Housing Administration (FHA). A unique feature of the HECM loan is the Mortgage Insurance Premium (MIP). This is required by and paid to the Housing of Urban Development (HUD) to insure the mortgage against losses.

Reverse Mortgages can be used for virtually anything!

  • Pay off existing mortgage with loan proceeds
  • Cover healthcare costs
  • Pay taxes and insurance
  • Make home modifications
  • Or simply build a reserve fund

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Reverse mortgages are non-recourse loans. This means that there is no recourse to you, your estate or your heirs if the loan balance exceeds the home's value at maturity as long as you or your estate sell the property to pay off the debt. If you or your estate wants to retain the property, the balance must be paid in full. Any remaining equity in the property after the reverse mortgage is paid, belongs to you or your estate.

Counseling by an independent third party, FHA approved counselor, is required to ensure consumer's knowledge of program costs and other possible options.

Is a Reverse Mortgage Right for You?

We realize your home is probably the largest asset you own and using its equity from a reverse mortgage requires serious thought. It may not be for everyone; however, a reverse mortgage is all about making the most of the equity that you have acquired.

There are up-front costs associated with a reverse mortgage, so you may want to consider other options if you plan to stay in your home for only 2 to 3 more years. Since each senior's situation is unique, it is important to talk with your Financial Advisor or someone you trust when exploring your reverse mortgage options.

Flexible payout options available:

  • Line of credit, which allows you to draw on loan proceeds
  • Fixed monthly payments for a set term
  • In a lump sum
  • Or a combination of the above

Loan proceeds are based on several factors:

  • Age of the youngest borrower
  • Appraised home value
  • Current interest rates
  • Amount of equity in the home
  • Mortgage product selected

As the homeowner, you are still responsible for paying all property related fees, taxes and insurance. The home must be maintained in good condition and be your primary residence.

With enough equity in your home you may qualify for a reverse mortgage. Typically, the older you are and the more equity in your home, the more loan proceeds you can receive.