Receiving Payments From A Reverse Mortgage
How Much Cash Can I Be Paid?
The amount a person can borrower depends on a number of factors including:
- The borrowers age
- Current interest rates
- The value of the property
- In the case of the HECM program (Home Equity Conversion Mortgage), the FHA loan limit will be taken into consideration. This will come into play on homes that exceed this limit. The FHA lending limit nationally as of March 2017 is 150% X the Freddie Mac lending limit which equals the FHA lending limit of $636,150.
Payout Options for Reverse Mortgages
The FHA HECM program offers multiple payout options for borrowers while fixed rate reverse products only allows for a lump sum payment. The HECM product is very popular, in part, because of the flexibility that it offers to consumers. Below are some payout options for the HECM program:
Tenure: Stable monthly payment for as long as a borrower lives in the property as his/her primary residence.
Modified Tenure: Allows for a combination of scheduled monthly payments and the ability to access funds from a line of credit.
Term: Consistent monthly payouts for a predetermined number of months.
Modified Term: Scheduled monthly payouts for a set number of months, and the ability to access funds from a line of credit.
Line of Credit: Flexibility of being able to draw on an open line of credit at will until equity is depleted. The amount of money that remains in a line of credit grows each month by what is called a growth rate. The growth rate works similar to earning interest on a CD. The difference is the growth rate ads only to the amount you can draw (Borrow).
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.
Other Popular Reverse Mortgage Questions:
What are some basic qualification parameters?
How much cash can I get and how do I get paid?
What happens to my debt and what is the maximum I can owe?
Will there be anything left for the borrower or their heirs once the property is sold or the borrower no longer uses the home as their primary residence?
What are some of the costs associated with reverse mortgages?
Will receiving payments affect one’s Social Security, Medicaid, or Medicare benefits?
Who owns the property, the lender or the borrower?
Is it possible to refinance a reverse mortgage if a better opportunity becomes available?
Are the proceeds of a reverse mortgage taxable income?
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Potential Benefits of Reverse Mortgages**:
- No monthly payments and no repayment is required until all borrowers are no longer using their property as their primary residence, all parties on the deed pass away, or they fail to pay their property taxes and homeowners insurance.
- Tax free monthly income*
- Payments can be used for whatever the borrower wants, including home renovations, consolidating debt, paying for medical expenses and insurance costs, and traveling and other leisure activities
- Reverse mortgages provide a tool that allows seniors to tap into the equity they have in their homes. There are no income or minimum credit score qualifications. In today’s tightening credit markets, reverse mortgage products may be one of the best solutions available to most retired homeowners.
- Possibly the greatest benefit of all, reverse mortgage programs may help seniors remain in their homes that they have worked so hard to pay for throughout their lives.
- A reverse mortgage is what we call a non-recourse loan. This means that with a reverse mortgage you are not personally liable. The liability is only to the extent of the value of your home at time of sale, death or vacating the premises as your permanent residence. You are not liable nor are your heirs personally liable; they can either sell the home at time of your death or keep the home and pay off the remaining balance of the reverse mortgage.
Talk to a reverse mortgage professional to learn more about some of the benefits of reverse mortgages and to see if one is right for your financial needs.
- Be sure to check out our page which weighs a reverse mortgage versus a traditional home equity line of credit (HELOC).
- Also, learn how borrowers can use funds for a reverse mortgage to help pay for assisted living and/or nursing home care.
Related Topic: So, there are no monthly payment obligations? Not exactly.
*Consult a financial tax professional for details.
**Loan benefits and parameters are subject to change. Consult with a mortgage professional for up-to-date information.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry is 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.
