What is a Reverse Mortgage Loan?

A reverse mortgage loan is a Federal Housing Administration (FHA) insured loan for home owners ages 62 years and older that use a portion of their home’s equity as collateral.

How Can I Qualify for a Reverse Mortgage Loan?

To be eligible for a reverse mortgage loan, borrowers must meet a few basic requirements. Borrowers must be at least 62 years old and have sufficient equity in their home. In addition, there must not be any liens against the home and any existing mortgages must be paid off upon closing of the reverse mortgage loan. The home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. Housing and Urban Development (HUD)-approved condominiums and manufactured homes that meet FHA requirements are also eligible. A reverse mortgage calculator can help determine eligibility.

The Federal Housing Administration (FHA) uses the following to determine if there is enough equity in the home:

  • Current interest rate
  • Whether the rate will be variable or fixed
  • Age of the youngest homeowner
  • FHA lending limits
  • Appraised value of the home

How Much Can I Receive?

The amount that can be borrowed will depend on three things: age, current interest rate, and the appraised value of the home. Use a reverse mortgage calculator to estimate what you may be eligible to receive.

Are There Limits To How I Can Use the Funds From a Reverse Mortgage Loan?

No. As long as any existing mortgages on the property are paid off upon closing of the loan and all required property taxes and insurance are maintained, borrowers may use the loan proceeds however they wish.

How Will I Receive My Reverse Mortgage Funds?

You will receive the proceeds from a reverse mortgage loan in any of the following ways:

  • Lump sum – a lump sum of cash at closing.
  • Tenure – equal monthly payments as long as the homeowner lives in the home.
  • Term – equal monthly payments for a fixed number of years.
  • Line of Credit – draw any amount at any time until the line of credit is exhausted.
  • A combination of the options above.

When Does the Loan Become Due?

Your loan will become due when under any of the following circumstances:

  • The borrowers have passed away
  • The property is in disrepair and is unable to make or has refused to make repairs
  • The borrowers have sold the home
  • The property is no longer the principal residence of at least one borrower
  • The borrower does not live in the property as their primary residence
  • The borrower fails to pay required property taxes and/or insurance

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