Reverse Mortgage 101

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What is a Reverse Mortgage?

A reverse mortgage, or Home Equity Conversion Mortgage (HECM), is a loan that enables homeowners who are at least 62 years old to convert some of their home equity into cash. The cash can be used for any purpose.

It is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

No monthly payments to the lender are required. The loan is due when the home is sold or otherwise vacated.

YOUR PART OF THE DEAL: You are living in the home and it is your primary residence. You must stay current on property taxes, homeowner’s insurance, homeowner’s association dues (if applicable), and maintain the condition of the property.

FACT vs FICTION

Fact #1 – It is just a loan. You are not ‘giving up’ your home to the lender, FHA, or anyone else. You still retain ownership and any equity you have in the home. Title stays in your name or your trust and the home transfers to your beneficiaries upon your passing as usual. You may sell the home at any time and retain any proceeds.

Fact #2 – It is NOT necessary that your home is free & clear to qualify for a reverse mortgage. Most borrowers today use loan proceeds to pay off an existing mortgage. For a lot of borrowers not having to make a monthly mortgage payment anymore is enough.

Fact #3 – It is an expensive loan. This is not true. Our interest rates are comparable to conventional FHA rates. Our closing costs are the lowest in the business!

Fact #4 – HECMs are insured by the Federal Housing Administration (FHA). The insurance provides the following protections and peace of mind for borrowers and their children:

• It is a non-recourse loan. This means the borrower(s) or their heirs will never owe more than the home’s fair market value.
• The terms of any payment plans to the borrower cannot be changed.
• If there is a line of credit. The lender cannot reduce or change the terms of the line of credit.

Here’s some cool facts

• Single Family Residences
• Townhomes
• HUD Approved Condominiums
• 2-4 units (one unit must be your primary residence)
• Manufactured home that meets FHA requirements

If your condominium complex is not currently HUD approved, we can help with the approval process.