Introduction to Reverse Mortgage

Imagine living in your home without a traditional monthly mortgage payment *, or instead enjoying monthly loan proceeds from the years you’ve invested in your home. A reverse mortgage loan is a unique tool designed for seniors 62 and older. You enjoy access to part of the equity in your home and the freedom and comfort of the home you’ve known for so many years. It’s your home, now you can put it to work for you.

Reverse mortgage borrowers retain ownership and title to their home*. As with all mortgage loans, your loan is secured by a lien, but you can now benefit from the equity that has been building in your home for years. In addition, HECM (Home Equity Conversion Mortgage) reverse mortgage loans give you the peace of mind of a government FHA-insured loan where your home and property are the only assets which secure the loan. In order to retain the home when the reverse mortgage becomes due and payable, the borrower(s) or heirs must pay the entire loan balance and in some cases the payoff after the loan is due may be greater the the value of the borrower’s home. So while the payoff amount may be greater, the borrower never owes more than the value of the home.

You can get a reverse mortgage on your primary residence and no repayment is due until the home is sold, the last borrower passes away or permanently leaves the home*. Borrowers also must keep the home in good condition, pay property taxes and keep homeowner’s insurance coverage to avoid the loan becoming due and payable.

As a protection all those seeking a reverse mortgage are required to obtain counseling (from an independent HUD-approved third party counselor) prior to incurring any costs associated with the loan (other than the counseling fee). While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid, SSI (Supplemental Security Income),and Medi-Cal.

The Facts
– A Reverse mortgage is a specialized loan for seniors 62 and older
– A reverse mortgage allows seniors to access a portion of the equity in their home.
– Borrowers maintain title and ownership of their home*.
– Proceeds from a reverse mortgage are not subject to personal income taxation, but borrowers should seek tax advice on how proceeds may effect government needs-based programs such as Medicaid and Medi-Cal.
– It is not a government grant, but a loan that is repaid in the future when the home is sold or the last borrower dies or permanently leaves their residence
– A reverse mortgage is eligible only for the borrower’s primary or principle residence
– HUD counseling (from an independent HUD-approved third party counselor) is required prior to the borrower incurring any costs associated with the loan
– A reverse mortgage loan is secured by a mortgage on the home and failure to comply with loan terms could result in foreclosure

 

  • *There are some circumstances that will cause the loan to mature and the balance to become due and payable which could result in the sale of the home to repay the loan.
  • *Borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards.
  • *Credit is subject to age, income standards, credit history and property qualifications.
  • *Loan rates, fees, terms and conditions are not available in all states and subject to change.*Borrowers should seek professional tax advice regarding reverse mortgage proceeds.

(Homeowners continue to pay property taxes, homeowner’s insurance and keep up home maintenance. Although there are no monthly mortgage payments, interest does accrue on the portion of the loan amount disbursed)