Reverse Mortgage

What is a Reverse Mortgage?

A reverse mortgage enables older homeowners to access the equity in their homes, providing funds for various purposes. It functions as a loan against a property that is either fully paid off or has a small remaining mortgage, which can be settled using the reverse mortgage funds, leaving the homeowner with additional cash for other needs. Learn more about the advantages and disadvantages of reverse mortgages, as well as the typical eligibility requirements.

Key Takeaways:

A reverse mortgage allows homeowners to convert a portion of their home equity into cash, specifically designed for older homeowners.
Eligibility for a reverse mortgage depends on factors such as age and the amount of home equity.
For the most common type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), the homeowner must be at least 62 years old.
Obtaining a reverse mortgage involves determining the loan amount, repayment terms, and interest rates.
Reverse mortgages enable homeowners to access their home equity while remaining in their property.

Key Questions:

What is the 60% Rule in a Reverse Mortgage?
In the first year of an FHA-approved reverse mortgage, you are limited to accessing 60% of the loan amount, or the amount needed to pay off your existing mortgage plus 10%, whichever is greater. This rule will remain in effect through 2027.

Can I Lose My Home With a Reverse Mortgage?
Yes, you could lose your home with a reverse mortgage if you fail to comply with the loan's terms. A lender may initiate foreclosure if you neglect property tax payments, homeowners insurance premiums, or home maintenance obligations.

Can I Use the Funds from a Reverse Mortgage for Any Purpose?
Yes, you can generally use the funds from a reverse mortgage for any purpose. For example, you can use the funds to pay off credit card debt, build an emergency fund, or finance home improvements. However, if you have a single-purpose reverse mortgage, the funds must be used for a specified purpose, such as home renovation or paying off taxes.

What Are Some Alternatives to a Reverse Mortgage?
If you need funds and wish to access your home equity, there are alternatives to a reverse mortgage. You may consider a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance. These options do not have age restrictions, but you may face stricter credit requirements compared to a reverse mortgage.

Can You Have More Than One Reverse Mortgage?
You are only permitted to have one active reverse mortgage at a time. However, once you have repaid an existing reverse mortgage, you can qualify for another.

Benefits

Like all loan programs, reverse loans have many aspects that need to be reviewed to see if they fit your mortgage needs.

Pros

Flexibility with Loan Funds: A reverse mortgage provides flexibility in how you use the proceeds. You can allocate the funds toward various needs, such as supplementing income, funding home improvement projects, paying off debt, or contributing to retirement savings.
Less Stringent Loan Requirements: Reverse mortgages generally have fewer requirements compared to traditional loans. While lenders will review your credit history for any past delinquencies and other relevant factors, there are no minimum credit score or income requirements.
Ability to Remain in Your Home: A reverse mortgage allows you to access your home equity while staying in your home. You can postpone mortgage payments until you no longer occupy the property, providing peace of mind and financial flexibility.

Cons

Age Requirements: To qualify for a reverse mortgage, you typically need to be an older homeowner. For the most common type of reverse mortgage, the Home Equity Conversion Mortgage (HECM), you must be at least 62 years old.
Interest Rates and Costs: Interest rates for reverse mortgages are often higher than those for traditional mortgages. In addition to interest, there are various costs, such as lending fees, closing costs, loan servicing fees, mandatory counseling, homeowners insurance, property taxes, and annual mortgage insurance premiums.
Impact on Estate: While a reverse mortgage allows you to leave your home to your heirs, they will be responsible for repaying the loan.

Reverse Mortgage Requirements

Not all homeowners are eligible for a reverse mortgage. Similar to traditional mortgages, applicants must meet specific criteria set by the lender, as well as other requirements. The eligibility criteria for a Home Equity Conversion Mortgage (HECM) include:

The homeowner must be at least 62 years old.
The property must be the homeowner's primary residence.
The homeowner must have no late payments in the past 24 months for property-related expenses, such as mortgage payments, property taxes, and insurance premiums.
The homeowner must complete a government-approved counseling session.

While a reverse mortgage lender will review the applicant's credit history, there are no specific credit score or income requirements, unlike traditional mortgages.

Testimonial

Take a look at what our clients say

Rob was fantastic to work with. He made the entire process easy and stress free. If you need a mortgage, Rob is the best option to work with.
10/10 recommend!

Corrine King

Rob is the best! Listens, researches all your options, explains your options in details, and helps you get what is best for you!
We’ve been a returning customer multiple times and will continue in the future!

Marcia Avalos

Rob and team were amazing during a very stressful time in my life. I always felt like i was his number one priority. He was thorough and transparent in providing me my options - he listened and understood my situation including multiple properties, timing and coordination with my ex-spouse. He was willing to drive across town to deliver forms for signature! I always felt connected and a priority! I will never need another mortgage coach.

Tara Page

Rob has been very attentive and helpful from the day one until the closing day. He was able to get me through the process and most importantly succeed in it, when I was already feeling discouraged and wanting to give up on buying a house several times in the last few months.
He made things go as easy as possible for me, smooth, even with our communication being based only on emailing and calling each other. I am a first time home buyer and i honestly feel very satisfied with the process and I would recommend Rob's services to all of my friends and anyone who is intrested in purchasing a home. 👌

Joanna Zalecka

I’m so thankful and appreciative for all the hard work and dedication from Rob and his team. He walked me through each step of the process, so my family and I could purchase a home.🏠
I recommend Coach Rob to all my friends and family!!! 🏠🏡🔑