1. What is a reverse mortgages?

A reverse mortgages is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home house loans payments can be paid to you. But unlike a traditional home equity loan or second home loans, no repayment is required until the borrower(s) no longer use the home as their principal residence. FHA’s HECM provides these benefits. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA’s HECM reverse house loans?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgages balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.

3. Can I apply if I didn’t buy my present house with FHA mortgages insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgages. Your new FHA HECM will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What’s the difference between a reverse home loans and a bank home equity loan?

With a traditional second house loans, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly home loans payments. The reverse home loans is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgages limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you “missed your home loans payment.”

6. Can the lender take my home away if I outlive the loan?

No. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current and maintains the property.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgages plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

8. How much cash can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s home loans limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You can use an online calculator like the one on the AARP website to get an idea of what you may be able to borrow.

9. Should I use an estate planning service to find a reverse mortgages?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders.

10. How do I receive my payments?

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 – unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.
Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

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