A reverse mortgage loan is a special type of mortgage loan for seniors (generally age 62 and older) that pays a homeowner loan proceeds drawn from accumulated home equity. Unlike a traditional home equity loan or second mortgage loan, no repayment is required until the borrower(s) no longer use their home as their principal residence. Interest on a conventional loan is calculated as simple interest while on a reverse mortgage the interest is calculated as compound interest.
Reverse mortgage loans were generally introduced in the market in 1989 with the U. S. Department of Housing and Urban Development (HUD) sponsored, FHA-insured, Home Equity Conversion Mortgage (HECM). The HECM is one of the most common types of reverse mortgage loans. In Massachusetts the Term Reverse Mortgage has been available since 1983 from more than 68 lenders, banks and credit unions across the state.
Reverse mortgages are becoming popular in America. HUD’s Federal Housing Administration (FHA) created one of the first reverse mortgages. The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program which enables you to withdraw some of the equity in your home by doing a reverse mortgage. Reverse Mortgages are loans that you could get against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you turn the value of your home into cash without having to move or repay the loan each month. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more.
The cash you get from a reverse mortgage can be paid to you in several ways:
- all at once, in a single lump sum of cash
- as a regular monthly cash advance
- as a “creditline” account that lets you decide when and how much of your available cash is paid to you
- or as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home.
Qualifications for reverse mortgages
- All borrowers must be 62 or older
- Must be listed on title of the property
- Must participate in a reverse mortgage counseling session (HUD requirement)
- Must occupy property as primary residence
Type of Properties Eligible for Reverse Mortgages
- Single family homes
- Multi-family homes (2-4 units)
- Manufactured Homes
You can receive free information about reverse mortgages in general by calling 888-210-4995. Since your home is probably your biggest single investment, it’s smart to know more about reverse mortgages, and decide if it is the program for you!