Reverse mortgages are becoming very popular among seniors today, and since your house is probably the biggest investment you’ll ever make, it’s smart to learn more about what’s available to you.

Let’s start begin at the beginning…what is a reverse mortgage?

Simply put, a reverse mortgage is a loan that lets you convert a piece of the equity in your home into cash. But unlike a traditional home equity loan or a second mortgage, no repayment is required until the borrower, in this case, you, no longer use the home as their primary residence. There are three types of reverse mortgages:

• single-purpose reverse mortgages, offered by some state and local government agencies and nonprofit organizations
• federally-insured reverse mortgages, known as Home Equity Conversion Mortgages or HECMs and backed by the US Department of Housing and Urban Development (HUD) and the FHA
• proprietary reverse mortgages, private loans that are backed by the companies that develop them

Let’s talk about FHA – they created the very first reverse mortgage!

To be eligible for the HECM, the FHA requires you to be a homeowner 62 years of age or older, that you own your home outright, or have a very low mortgage balance, and you must live in the home. You will also need to talk to an HECM counselor before they’ll let you have the loan, so you understand all the terms and conditions of the loan. Some people think you need to have financed your home with an FHA loan in the first place to get an FHA reverse mortgage. That is not the case, but your new HECM will be FHA-insured.

When it comes to getting your money, you have five options:

• Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence
• Term – equal monthly payments for a fixed period of months selected
• Line of Credit – you can take the money when you want, and as much as you want, until the line of credit is exhausted
• Modified Tenure – this is a combination of line of credit with monthly payments for as long as you remain in the home
• Modified Term – which is a combination of line of credit plus monthly payments for a fixed period of months selected by the borrower

Now the FHA does not recommend specific “finder” services to locate a lender. You can actually get all the info you need for free from HUD and the FHA. Search online at www.hud.gov or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you, and they can help you find a lender, too.
Have questions for me? Drop me a comment below!

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Financing, Mortgages, Retirement Planning