Reverse Mortgages

Reverse Mortgage enables older homeowners to convert a portion of the equity in their property into cash.  It also provides a method for retirees to stretch their finances by using the accumulated equity in their home to cover their living expenses.

As long as the homeowner lives in the home, they are not required to make monthly mortgage payments. Instead, the lender makes monthly payments to you. The homeowner is not required to pay back the reverse loan until the home is sold, vacated, or the owner passes away.

However, the homeowner must remain up to date with their property taxes, hazard insurance, homeowner’s association dues, other applicable fees, and be able to maintain the property in good order.

Reverse Mortgage Benefits

  • No FICO qualification

  • No debt-to-income ratios – however, borrowers must demonstrate the capacity to pay basic obligations

  • Provides greater freedom in retirement – There are no restrictions on how the borrower uses the loan proceeds and it is non-taxable income

  • Non-recourse loan

  • No debt is assigned to the heirs when the loan becomes due. Instead, the family is given a period of time to pay off the loan or sell the home.  Family members and heirs have the opportunity to buy the property for 95% of the appraised value, even if the property is worth less than the amount owed

  • A reverse purchase can help a borrower retain their savings, improve their monthly cash flow, and/or finance a purchase

  • Helps seniors relocate to a different region or to move closer to family

  • Helps seniors move into more affordable homes, requiring less maintenance while better serving their needs by providing features like handrails, wider doors, or a single-story layout

Reverse Requirements

  • Borrowers must be 62 years of age or older

  • Borrowers must qualify to pay taxes, insurance, or HOA if applicable

  • Borrowers can own their property outright, or have a low balance on the mortgage that can be paid off at closing with proceeds from the reverse loan

  • The borrower must have the ability to pay ongoing property fees

  • Before obtaining a reverse mortgage, borrowers and their spouses must receive independent counseling

Reverse Mortgage Loan Options Mortgages

Reverse Mortgages are insured by the Federal Housing Administration and are part of the Home Equity Conversion Mortgage (HECM) program.

There are several types of Reverse Mortgages:
  • Payment of loan proceeds – The borrower can receive the funds in a lump sum, in monthly installments, as a line of credit or a combination of both, or pay off an existing mortgage.

  • Interest Rate – The borrower can choose between an adjustable and a fixed interest rate. A fixed rate is only available with the lump sum payment option.

  • Purchase – Allows borrowers to purchase a principal residence with less upfront investment than an all-cash purchase.

  • Refinance – A borrower can convert one HECM to another to lock in a lower interest rate or borrow more cash if the property has increased in value.