The Facts about Reverse Mortgage
Definition of Reverse Mortgage: noun - A Reverse Mortgage is simply a home loan that does not require payment as long as the borrower lives in the home. The loan is not due until the last surviving borrower passes away.
You and your family retain title
The FHA HECM guarantees that you retain title to your home - and if you should be in your home when you pass - your home passes to your heirs, church, charity, however you have determined in your will or trust, not to the bank or to the government. It is interesting, before the FHA created their version of the Reverse Mortgage program in 1989 some early versions of non FHA reverse mortgages had an "equity share" clause in them that forced a number of seniors from their homes, that's one of the primary reasons HUD and the FHA stepped in and created this safe, government guaranteed version.
Stop your monthly mortgage payments, or make payments
With the FHA HECM program you never have to make another mortgage payment againf for as long as you live in your home! But, you can if you choose to. Many today are using this just like a regular mortgage, but with a much lower interest rate and with a flexible payment option. You can make interest only payments if you choose, you pay your revese mortgage off in part or in full at any point - there is NO Pre Payment fee! You can sell your home at any point - you can even refinance it (into another HECM or Reverse Mortgage or back to a conventional mortgage). The only payment the FHA requires you make is that you continue to pay your property taxes and your homeowners insurance, just as you do today.
Your heirs can still get an inheritance
The FHA uses safe County Lending Limits that helps ensure you retain a safe a prudent amount of equity in your home - for you to pass on to your heirs, or to use yourself if you should sell your home an move. And, just as if you were to pass away while in a conventional mortgage, you heirs have the choice of either selling the home, paying off the loan and keeping the ballance. Or, if they want to keep the home they will simply refinance the existing ballance into their own names.
Your home can pay you
With the FHA HECM the bank pays you, not the other way around. You can receive the amount you have available either as a Lump Sum at closing of you loan, as monthly payments for as long as you live in the home, or for a set period of time. You can use the Government Credit Line option and pull from it what you need, when you need it - or any combination of these payment options.
How to find out what you qualify for
The amount you qualify for depends on your age, the older you are, the more you will have available. If there is more than one person on title the FHA will use the age of the youngest title holder to determine benefits. Next the FHA will look at the mortgage balance if there is one, compared to the value of the home or the FHA County Lending Limit. The final factor is the interest rate - the FHA HECM uses the One Year Treasury Rate index to determine the rate, one of the most stable indexes in the US.