In some situations—particularly for seniors who don’t plan to move—a reverse mortgage (also known in most cases as a home equity conversion mortgage) is a useful option for increasing retirement funds. If you’re unfamiliar with this type of loan for seniors, take a look at these common questions about reverse mortgages.
What Is a Reverse Mortgage?
A reverse mortgage is a type of loan for homeowners age 62 and up in which the lender makes payments to the borrower based on a percentage of their home equity. The loan is insured by the Federal Housing Administration, usually paying out in fixed monthly installments, a lump sum, or a line of credit while making no monthly mortgage payments. You must still pay property taxes and homeowners insurance, and continue to maintain the home to FHA standards.
When Is the Loan Repayment Due?
The loan must be repaid when the last owner is no longer occupying the home as their principal residence.
What Are Reverse Mortgages Used For?
Typically, home equity conversion mortgages are used to finance major home renovations, pay off an existing mortgage or other debt, cover medical bills, buy another home, or make new income available for daily expenses or travel in retirement.
Who Is Eligible for a Reverse Mortgage?
You must be a homeowner age 62 or older with small or no mortgage payments to qualify for a reverse mortgage. Borrowers cannot be delinquent on any federal debts, and must be able to pay off any existing liens or mortgages with the funds. There’s also a requirement to attend a HUD-approved counseling session. Lenders run a credit check and evaluate your income, assets, and monthly expenses when determining whether to extend an offer.
What Does the Process Entail for Getting a Reverse Mortgage?
When applying for a home equity conversion mortgage, expect to:
- Review your financial situation with the lender
- Fill out the mortgage application
- Speak with a FHA-approved counselor
- Have your home appraised
- Wait for loan processing and underwriting
- Complete the loan closing
- Receive your money
Use HBI for Your Reverse Mortgage
At HBI Mortgages, we’re committed to guiding you through financial process to ensure that you fully understand what’s happening and all the implications.