1. What
is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner
convert a portion of the equity in his or her home into cash. The
equity built up over years of home mortgage payments can be paid to
you. But unlike a traditional home equity loan or second mortgage,
no repayment is required until the borrower(s) no longer use the home
as their principal residence. HUD's reverse mortgage provides these
benefits, and it is federally-insured as well.
2. Can
I qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration
(FHA) requires that the borrower is a homeowner, 62 years of age or
older; own your home outright, or have a low mortgage balance that
can be paid off at the closing with proceeds from the reverse loan;
and must live in the home. You are further required to receive consumer
information from HUD-approved counseling sources prior to obtaining
the loan.
3. Can
I apply if I didn't buy my present house with FHA mortgage insurance?
Yes. While your property must meet HUD minimum property standards,
it doesn't matter if you didn't buy it with an FHA-insured mortgage.
Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
4. What
types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property
that you own and occupy. Townhouses, detached homes, units in condominiums
and some manufactured homes are eligible. Condominiums must be FHA-approved.
It is possible for condominiums to qualify under the Spot Loan program.
The home must be in reasonable condition, and must meet HUD minimum
property standards. In some cases, home repairs can be made after
the closing of a reverse mortgage.
5. What's
the difference between a reverse mortgage and a bank home equity loan?
With
a traditional second mortgage, 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 mortgage payments. The reverse
mortgage 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, other loan fees, and the appraised
value of your home or FHA's mortgage 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 and other conventional payments like utilities,
but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed
or forced to vacate your house because you "missed your mortgage
payment."
6. Can
the lender take my home away if I outlive the loan?
No! Nor is the loan due. 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. You can never owe more than
your home's value.
7. Will
I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence,
you or your estate will repay the cash you received from the reverse
mortgage, plus interest and other fees, to the lender. The remaining
equity in your home, if any, belongs to you or to your heirs. None
of your other assets will be affected by HUD's reverse mortgage loan.
8. How
much money can I get from my home?
The amount you can borrow depends on your age, the current interest
rate, other loan fees and the appraised value of your home or FHA's
mortgage 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.
9. Should
I use an estate planning service to find a reverse mortgage?
HUD
does NOT recommend using an estate planning service, or any service
that charges a fee just for referring a borrower to a lender! HUD
provides this information without cost, and HUD-approved housing counseling
agencies are available for free, or at minimal cost, to provide information,
counseling, and free referral to a list of HUD-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 in installments,
at times and in amounts of borrower's choosing until the line of credit
is exhausted.
Modified Tenure - combination of line of credit with
monthly payments for as long as the borrower remains in the home.
Modified Term - combination of line of credit with
monthly payments for a fixed period of months selected by the borrower.
