REVERSE MORTGAGE
RETIRE IN A HOME THAT’S RIGHT FOR YOU
If you are 62 or older, a reverse mortgage loan can be used to turn a portion of the equity in your home into cash you can use for many different purposes, which may enhance and/or extend your retirement. If you currently have a forward mortgage, a reverse mortgage could eliminate your monthly mortgage payment.
REVERSE MORTGAGE ELIGIBILITY
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Borrower(s) must be 62 years or older
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Must be homeowner and either own home outright or have significant equity
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Must live in home as primary residence (more than six months out of the year)
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Property must be a single-family home, a 2- to 4-unit dwelling or an FHA-approved condo
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Must meet minimal credit and property requirements
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Must receive reverse mortgage counseling from a HUD-approved counseling agency
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Must not be delinquent on any federal debt
POTENTIAL ADVANTAGES OF A REVERSE MORTGAGE
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You can receive money from the equity you have in your home, and it is usually tax free.*
You can receive these loan proceeds in a lump sum, in a line of credit, in a monthly cash flow payment or in a combination of these three options.
*This information does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
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You may be able to eliminate your monthly mortgage payment.
With a reverse mortgage loan, you can refinance a traditional mortgage and free yourself of the burden of fixed monthly mortgage payments, as long as you live in your home as a primary residence, stay up to date on property taxes and homeowners insurance (and homeowners association dues, if applicable) and maintain the home.
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You will never owe more than what your home is worth when your loan matures and your home is sold.**
When a maturity event occurs (e.g., the property is no longer the principal residence of at least one borrower) and the loan becomes due and payable, neither you nor your heirs are responsible for paying the deficit if the balance owed on your reverse mortgage exceeds the home value. If at the time of your passing your heirs wish to keep your home, they can purchase it for 95% of the current appraised value of the property or the balance owed, whichever is less.
**There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes, insurance and maintenance (and HOA fees, if applicable). Credit is subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
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You may be able to bridge the Medicare gap from age 62 to 65
Many seniors delay retirement until they are 65 because they cannot afford to pay for their health insurance before Medicare kicks in at age 65. With a reverse mortgage loan, you can avoid paying income tax on money drawn from an IRA or other accounts to help keep your retirement funding plan in place without diminishing your current assets.***
***This information does not constitute financial planning advice. Please consult a financial planner regarding enhancements to retirement plans.
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You may be able to pay for long-term care expenses
With the proceeds from a reverse mortgage loan, you could purchase long-term care insurance to handle these expenses without losing your home in the process.
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Home Equity Conversion Mortgage for Purchase (H4P)
An H4P (a type of HECM backed by the FHA) enables senior homebuyers to purchase a new primary residence that better suits their needs and obtain a reverse mortgage in one transaction. You can use an H4P if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. This type of HECM reverse mortgage, if it is offered in your area, may allow you to:
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Build a new customized home
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Relocate closer to friends and family members
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Purchase a home in senior housing community
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Downsize to a smaller, easier-to-maintain home
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Purchase a primary residence suitable for your current needs
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Move into a new home that’s easily accessible with modern amenities
HOME EQUITY CONVERSION MORTGAGES (HECMS)
Federally-insured reverse mortgages backed by the U. S. Department of Housing and Urban Development (HUD). HECM loans enable you to withdraw a portion of your home’s equity and can be used for any purpose. How much you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including:
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your age
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the type of reverse mortgage you select
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the appraised value of your home
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current interest rates, and
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a financial assessment of your willingness and ability to pay property taxes and homeowner’s insurance.
PROPRIETARY REVERSE MORTGAGES
Private loans backed by the companies that develop them.