What is a Reverse Mortgage

A HECM reverse mortgage is a U.S. government regulated and FHA-insured home loan that allows seniors age 62 and older to gain access to a portion of their homes equity and to use the proceeds however they would like.

Reverse mortgages come in a variety of names, such as HECM’s, HomeKeeper, and Jumbo reverse mortgage.

Some major differences from a traditional home equity loan and a HECM reverse mortgage is that with a HECM reverse mortgage, a borrower’s approval is not conditioned upon income and credit. Instead, age, home value and current interest rates are now major factors, and the older you are the more cash you can get.

Other differences between a conventional home equity loan and a HECM reverse mortgage is that the HECM will not become due and payable like most conventional mortgages.

As long as the borrower maintains the property, continues to live in it as his/her principal place of residence, continues to pay the property taxes, homeowners association dues [if applicable]and hazard insurance, the borrower can live in their home until they reach the age of 150, without ever having to make a monthly payment on their mortgage.

All HECM, FHA-insured reverse mortgages are non-recourse loans. Non-recourse means, if the balance on your reverse mortgage loan ever exceeds your homes value [as in a declining housing market] you would not be responsible for repaying the amount over the market value or ever be faced with a foreclosure action for not making a monthly mortgage payment. Remember, HECM reverse mortgage payments are never mandatory, even if you live to be 150. The FHA-insurance premiums make this all possible.

Some similarities between a conventional home equity mortgage and a HECM reverse mortgage are that in both cases the borrower remains on title as owner and you can sell at any time without restrictions. You can also “will” all remaining equity to your heirs and refinance your loan if conditions become favorable.

With a U.S. government regulated HECM reverse mortgage, the cash you receive is tax-free and can be used for any purpose. You can receive your funds through a line of credit, equal monthly payments or installments, lump sum cash, or a combination of all.

For more information regarding the advantages or disadvantages of a HECM reverse mortgage, contact a Reverse Mortgage Lender with your questions.

History Of Reverse Mortgages

REVERSE MORTGAGES have been around since the mid 1960’s, but not until 1988 did reverse mortgages become safe and popular. Why? Because the U.S. Government got involved and regulation was put into place to assure qualified seniors that their best interest was paramount.

By the mid 1980’s, at the request and encouragement of many senior advocate groups such as AARP, the United States Congress approved the U.S. Department of Housing and Urban Development [HUD] and the Federal Housing Administration [FHA] to develop and make use of an insurance program for reverse mortgage loans.

On February 5, 1988, the FHA reverse mortgage insurance legislation was approved and signed by then President Ronald Reagan.

In 1989 the first U.S. government regulated and FHA-insured HECM reverse mortgage was approved and funded. It was called the “The Home Equity Conversion Mortgage” (HECM), FHA’s reverse mortgage program was born and it enabled seniors to access their homes equity for instant cash without having to sell or move from their homes.

Up until 1989, reverse mortgage loans had received some bad news that still exists today among less informed borrowers today. These older reverse mortgages were primarily “Equity Share” type loans and have nothing to do with today’s government regulated, FHA-insured HECM loans.

With the FHA insuring HECM reverse mortgages, borrowers are guaranteed they will never be responsible for re-paying more against their home than their home is worth. Borrowers will not have to be afraid of losing their home to a foreclosure for not making a monthly mortgage payment. This special government regulated and insured reverse mortgage is available only to seniors age 62 and older.

It is important to note that annually the federal government is asked for additional funding to make the FHA-insured HECM reverse mortgages available, and every year funding is more difficult to receive.

In 1998, FHA’s HECM reverse mortgage market was expanded to all 50 states and territories such as Guam, Puerto Rico and the U.S Virgin Islands. This has put additional strain on much needed funding to support the reverse mortgage industry.

There may be a day in the future, when HUD and FHA will no longer have an insured reverse mortgage loan program or it could be severely altered from the way it looks today…so if a HECM reverse mortgage seems like it may fit your financial needs…contact a reverse mortgage consultant today.

What is a reverse mortgage? A reverse mortgage is a specific loan designed to help senior citizens and folks sixty two (62) years of age and older. A reverse mortgage loan provided by the FHA allows a homeowner to withdraw a portion of the equity in their home and convert that equity into cash. The reverse mortgage also named the Home Equity Conversion Mortgage (HECM) provides seniors an additional financial instrument when planning for retirement. People who take advantage of this type of loan can use the extra cash to supplement Social Security, remodel the kitchen, travel, and or pay off credit card balances. The money received from this loan can also be used to buy a new home if you are able to use cash on hand to pay any difference between the reverse mortgage loan proceeds and the sale price of the property you are purchasing.
What is a reverse mortgage FAQ’s? Answers to all your HECM reverse mortgage questions.
1. Q. How do I qualify for this type of loan?
A. If you are sixty two (62) years of age or older and currently own a home you may be eligible. Reverse mortgage lenders will pre qualify you based on the following criteria; age, value of your primary residence, and amount of current equity.

2. Q. After I qualify how do I obtain the proceeds from the loan?
A. After securing your new reverse mortgage you will be given five (5) payment options. Tenure, Term, Line of credit, Modified Tenure, or Modified term. Each option is specific to the individual obtaining the loan. Please consult your loan consultant for further information.

If you find yourself still wondering what is a reverse mortgage please send us an email and we will answer your questions.

There are several different types of reverse mortgage.

HECM Saver: The HECM Saver option is one of the most popular reverse mortgages today. It’s specifically designed to help reduce cost. You’ll be given the option to choose either a Adjustable Rate HECM or a Fixed Rate HECM.

Fixed Rate: The results provided by the online reverse mortgage calculator are based on the Fixed Rate reverse mortgage program. The Fixed Rate program is popular due to the high dollar amounts you’re able to receive at funding. In addition, we often find that closing costs associated with the Fixed Rate program are substantially lower than other reverse mortgage programs.

Line of Credit: This program is only available when you choose the Adjustable Rate Reverse Mortgage. One main benefit of the Line of Credit that stands out above the rest is the ability for your line of credit to grow as you age.

Since the proceeds available to you are calculated based on age, the older you are directly impacts the amount you’re able to borrow.

Lastly, unlike the standard “HELOC” or Home Equity Line of Credit, the Reverse Mortgage Credit Line is federally insured and guaranteed to always be available.

Reverse Mortgage Tenure and Term Payout: Each program is designed to your specific needs. The Tenure Payout is popular among seniors looking to receive a guaranteed monthly distribution.

You’re able to receive the available funds for life (Tenure), or for a specified amount of time (Term). For those who choose this option, a direct deposit option will be available.

The monthly disbursements are tax-free and guaranteed as long as you live in the property.

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