The reverse mortgage is a home equity loan that’s designed to help seniors turn the equity locked in their home into tax free cash without having to pay monthly mortgage.
The funds you receive can be used for almost anything including paying off your existing mortgage (required as part of the loan), eliminating credit card debt, medical and other bills, or simply improving your lifestyle. The amount of your reverse mortgage is based on how old you are, how much your home is worth, and what interest rate the lenders offers to you. Generally speaking, the older you are and the more your home is worth the more you’ll receive.
All loans must eventually be repaid, and the reverse mortgage is no different. The loan is due once the borrower sells the home or passes away. Of course, the borrower may also choose to pay off the loan at any time. In most instances, a reverse mortgage is paid off when the mortgaged home is sold. It is important to note that reverse mortgages are designed so that the amount owed cannot exceed the value of the home. If the house can be sold for more than the value of the reverse mortgage, that equity belongs to the borrower or the borrower’s estate.
Today, almost all reverse mortgages that are originated are Home Equity Conversion Mortgages (HECM). The HECM is a program of the Federal Housing Administration (FHA), and these loans are guaranteed by the federal government. This means that you do not need to worry about your reverse mortgage lender failing to make payments to you.
Since 1961, the reverse mortgage industry has been working hard to build a product worthy of our nation’s growing senior population. With these ethical safeguards in place, a consumer should feel safe taking a reverse mortgage loan and borrowing with confidence. Together, the Federal Housing Administration and the reverse mortgage industry strive to do everything possible to help our nation’s seniors stay just where they want to be – at home.
More than half a million Americans have already discovered the benefits of a reverse mortgage.