Fast Facts for Anyone Considering a Reverse Mortgage
A HECM reverse mortgage loan lets seniors use the value of their home to provide a source of income while allowing them to stay in the home. With all of the complexities of a reverse mortgage loan, this quick reference guide provides at-a-glance information on eligibility guidelines and other requirements to help ease the understanding. Of course, a reverse mortgage loan may not be right for every homeowner, so use this as an overview and consult a Certified Reverse Mortgage Professional to see if a reverse mortgage loan is right for you.
Homeowner and Property Requirements
- Homeowners must be at least 62 years of age.
- Must be at least 62 years of age.
- The property must be either 1-4 unit primary residences, condominiums, or manufactured homes that meet FHA’s requirements.
- Homeowners must own the property as their primary residence and should have substantial equity in the home.
- Borrowers must not owe any back debt to the government.
- Income and credit scores are not a criteria to qualify.
- Borrower must receive reverse mortgage counseling from a HUD-approved housing counselor.
- Borrowers are required to maintain the property in “good condition” to protect the value of the home, pay their taxes annually and pay for their home owner’s insurance.
- Limits are set in place on borrower’s first year access to loan proceeds.
- Borrower must complete a Financial Assessment (FA) with their lender to confirm financial capability of taking on the reverse mortgage.
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- Homeowners can never owe more than their home’s value.
- Lenders cannot force seniors out of their homes.
- Loans become due when the last borrower (both spouses can be on the loan) sells the home, moves out of the home for 1 year or passes away.
- Heirs are not responsible for paying off a reverse mortgage loan.
- When the last living borrower leaves the house permanently, or passes away, heirs have several options to settle the reverse mortgage loan.
- Reverse mortgages do not affect one’s Medicare or Social Security benefits but can potentially impact Medicaid eligibility.
- Reverse mortgages can be re-financed; therefore a down real estate market should not be a consideration factor.
- Closing costs can range from 2% – 8% of the loan amount.
- Origination fees for an HECM can be up to 2% of the loan amount, depending upon the value of the home.
- Under FHA-HUD regulations, the maximum origination fee a lender can charge is capped at $6,000.
- Between 20% – 70% of the home’s value can be borrowed.
- There may be additional third-party fees that the borrower will be required to pay upfront.
- Borrowers of a reverse mortgage loan must also carry mortgage insurance.
- Borrowers must pay a monthly servicing fee, typically around $30-$35.
- In addition to the upfront mortgage insurance premium fee, borrowers must pay an annual MIP fee over the life of the loan, which is 0.5% of the outstanding reverse mortgage balance.
- There are no restrictions on how the money can be used.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.