Many homeowners have discovered that a reverse mortgage loan can be a valuable tool to leverage the equity they've built in their homes.
A reverse mortgage differs significantly from a traditional mortgage. Instead of you making monthly payments to a lender, with a reverse mortgage, the lender provides funds to you. These funds can be accessed through various options, including monthly installments, a single lump-sum payment, a line of credit, or a combination of a line of credit and monthly payments. The amount you can access is determined by factors such as your age, the appraised value of your home, and prevailing interest rates.
A key advantage of a reverse mortgage is that you are generally not required to repay the loan as long as the home remains your primary residence and you continue to meet loan obligations, such as maintaining the property and paying property taxes and homeowners insurance.
If you are age 62 or older and own your home or have a low remaining mortgage balance, you may be eligible for a reverse mortgage loan. Contact us today for a free, no pressure, no obligation consultation to explore reverse mortgage options and how they might align with your financial goals.
For more detailed information about reverse mortgage loans, explore the topics below:
You’ve worked hard to pay the mortgage on your home. With a reverse mortgage loan you can receive a portion of the equity that you earned. A federally insured HECM reverse mortgage loan can help you unlock that equity by increasing your monthly cash flow. Rest easy knowing you’re protected because with a reverse mortgage loan you can:
Speak with our experienced professionals today to better understand how a reverse mortgage loan could benefit your individual circumstances.
A reverse mortgage loan is specifically designed to allow senior homeowners to tap into their home equity. Seniors can choose to receive loan proceeds as a lump sum, monthly payments, a line of credit, or a combination of all three. This can significantly enhance cash flow during retirement. The term "reverse mortgage" arises because the lender makes payments to the homeowner, rather than the other way around.
Repayment of the loan, along with accrued interest and fees, is typically not required until certain events occur: the borrower passes away, the home is sold, the home is no longer the borrower's primary residence, or the borrower fails to meet loan obligations such as paying property taxes and homeowners insurance or maintaining the property.
Deciding to get a reverse mortgage loan is a significant financial decision that requires careful consideration. Many individuals find that a reverse mortgage allows them to utilize the equity they have accumulated in their home.
Those who often benefit most from a reverse mortgage are individuals who plan to remain in their homes for a considerable period and have built substantial equity.
If you have significant equity and intend to stay in your home long-term, a reverse mortgage loan could be a beneficial financial tool. Our knowledgeable professionals will evaluate your individual situation and provide you with multiple options to access the equity in your home.
If you are 62 years of age or older and own your home or have a low remaining mortgage balance, you may be eligible to apply for a reverse mortgage loan. The home must be your primary residence to qualify. There are specific requirements regarding the types of properties that are eligible:
Our team can help you determine your eligibility for a reverse mortgage loan. Contact us today!
Below is a general outline of the reverse mortgage loan process. Our dedicated professionals are here to guide you through each step. Please don't hesitate to reach out with any questions you may have.
Step 1 - Explore Reverse Mortgage Loans
Speak with a mortgage professional to understand the various reverse mortgage loan options available and select the one that best fits your needs. Or, decide that a reverse mortgage is not right for you.
Step 2 - Meet with a HUD-Approved Counselor
In order to obtain a reverse mortgage loan, you are required to meet with a counselor approved by the Department of Housing and Urban Development (HUD). This counseling session helps you understand the intricacies of reverse mortgages. Independent HUD counseling typically involves a fee (around $125-$175), and we are happy to provide you with a list of HUD-approved counselors in your area.
Step 3 - Complete a Reverse Mortgage Loan Application
After you’ve determined which reverse mortgage loan option is best for you. Our professionals will help you fill out a reverse mortgage loan application and gather required documents. Completing a loan application does not obligate you to get the loan.
Step 4 - Application Processing and Home Appraisal
While your application is being processed, a licensed appraiser will assess your home's value and identify any necessary repairs. Any significant issues must be addressed before loan approval can proceed.
Step 5 - Loan Underwriting
All loan details are thoroughly reviewed, and the loan undergoes underwriting to determine final approval.
Step 6 - Loan Closing
Upon approval, your loan will move to the closing stage, where you will have the opportunity to once again review the terms of the loan and sign all necessary documents. While reviewing the loan terms and documents, if you decide that the loan is not right for you, you are not obligated to sign the documents.
Step 7 - Receive your payments
After the closing is complete, you will have a three-business-day period during which you can cancel the loan. This is called a rescission period. Once this period ends, you will begin receiving your reverse mortgage loan proceeds according to the payment option you selected: lump sum, monthly installments, line of credit, or a combination.
Step 8 - Repaying your Reverse Mortgage Loan
Your reverse mortgage loan becomes due under specific circumstances. See the next section for details.
Because they operate differently than a traditional home mortgage loan, the repayment structure of a reverse mortgage loan can sometimes seem complex. As the borrower, you receive payments from the lender through various methods (monthly installments, lump sum, line of credit, or a combination). The loan, along with accrued interest and fees, becomes repayable under specific conditions:
A reverse mortgage loan becomes due when:
When the reverse mortgage loan becomes due, there are typically two ways to repay it:
Like any home mortgage, a reverse mortgage loan has specific conditions that must be met to remain in good standing. Borrowers may be considered in default for reasons such as:
Similar to a traditional mortgage, obtaining a reverse mortgage loan involves certain fees. Most of these fees can be financed into the reverse mortgage so that you don't need to come up with cash out of pocket. Here are some common fees for a reverse mortgage loan:
Origination Fee – This fee covers the lender's operational costs associated with originating the reverse mortgage. The calculation of this fee for HECMs is regulated by HUD and can be up to $2,500 for homes valued below $125,000. For homes valued at $125,000 or more, the fee is 2% of the first $200,000 of the home's value, plus 1% of the amount exceeding $200,000, with a maximum cap of $6,000.
Appraisal Fees – Before a reverse mortgage can be approved, a licensed appraiser will inspect your home to determine its current market value based on its condition, location, and prevailing market conditions. If the appraiser identifies significant repair needs, these issues will likely need to be addressed by a contractor, and followed by a re-inspection by the appraiser, before the loan can proceed.
Mortgage Insurance Premium – The mortgage insurance premium is a fee associated with the HECM reverse mortgage loan. The initial MIP will be .5 percent or 2.5 percent, depending on the amount you request to be disbursed. Additionally, you will be charged an annual MIP that equals 1.25% of the loan balance.
The mortgage insurance premium guarantees that you will continue to receive your monthly payments and that you will never owe more that what your home is worth once the loan reaches maturity unless you choose to payoff the loan while you or a non-borrowing spouse are still living in the home.
Closing Costs – Closing costs that are generally included in a reverse mortgage loan are:
Wow! You have made it this far and that was a lot of information! Please reach out for a free, no pressure, no obligation reverse mortgage consultation. Our primary goal is to educate you so that you can make the best decision about a reverse mortgage.
These materials are not from HUD or FHA and were not approved by HUD or any government agency.