Reverse Education Center

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Will I still own my home?

With a reverse mortgage, you — not the lender — own and control your home. You can't be removed from the home so long as you uphold the terms of the loan. As with a traditional forward mortgage, the lender simply puts a lien on the property to ensure the loan will be repaid. Learn More

Will my heirs get stuck with the debt?

No. A reverse mortgage is a “non-recourse” loan, which means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender can only enforce the debt through the sale of the property and cannot look to your other assets (or your estate’s assets) to meet any outstanding balance. If the loan balance is higher than the home’s value, your heirs will not be responsible for paying the difference when the home is sold to repay the balance. Learn More

Who is eligible for a reverse mortgage?

Eligibility for a home equity conversion mortgage (HECM), or federally insured reverse mortgage, requires the homeowner to be at least 62 years old and have substantial equity in their home. Additional HECM eligibility requirements include: • Living in the home as a primary residence • Undergoing counseling with a HUD-approved, third-party counselor • A financial assessment conducted by the lender Proprietary reverse mortgage eligibility requirements, including age minimums, may vary by lender and state. Learn More

Can I get a reverse mortgage on any type of property?

Eligible property types for reverse mortgages include single-family homes, FHA-approved condominiums, and certain types of manufactured homes.

What are the different types of reverse mortgages available?

The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM). These mortgages are federally insured and regulated by the U.S. Department of Housing and Urban Development (HUD). Individual lenders may also offer proprietary reverse mortgages available in certain states. Because proprietary loans are not federally-insured, the lenders have more flexibility to set their terms including lower borrower age requirements or higher loan amounts. Reverse mortgages are available in all states, but specific rules and regulations can vary, affecting the availability of different types of loans and the terms offered.

Are reverse mortgages available in all states?

Yes, reverse mortgages are available in all states, but specific rules and regulations can vary, affecting the availability of different types of loans and the terms offered.

What is a non-borrowing spouse, and how are they affected by a reverse mortgage?

A non-borrowing spouse is the spouse of the reverse mortgage borrower who is not named as a borrower on the loan. Spouses may not be on the loan for various reasons, such as not meeting the age requirement or for other financial planning reasons. If the borrowing spouse passes away, eligible non-borrowing spouses can remain in the home without repaying the loan, provided specific conditions are met, such as maintaining the home as their primary residence and keeping up with property taxes and insurance. To be considered eligible, non-borrowing spouses must be listed as such on the mortgage.

How does the reverse mortgage process work from application to closing?

Nearly all states and government-insured loans require that reverse mortgage borrowers participate in a counseling session with a HUD-approved third-party counselor. After the borrower completes the counseling, their reverse mortgage counselor will submit a counseling certificate to the lender. When they have received a counseling certificate, the lender can begin processing a mortgage loan application. During processing, the lender will order an appraisal, title report, and a flood certification. An underwriter will prepare a financial assessment as part of their evaluation of the mortgage loan application and lender-required documents such as income statements, tax returns, credit report, social security statements, hazard insurance policy, appraisal, title report, and flood certification. Approved mortgage loan applications will be scheduled for closing. Before closing, the borrower will receive various disclosures explaining the mortgage loan's costs and terms. On the day of closing, the borrower will sign multiple documents, including a Mortgage or Deed of Trust, Note, Loan Agreement, and important disclosures concerning the terms and conditions of the mortgage loan. If the mortgage loan is a refinance, the loan proceeds will be disbursed to the borrower and third parties, including the payoff of an existing mortgage lender following a 3-day period within which the borrower may cancel the transaction at no cost to them. This period is known as the 3-day Right to Cancel. Learn more.

What financial obligations do homeowners with a reverse mortgage have?

Reverse mortgage borrowers are required to keep current with property taxes, homeowner's insurance, and homeowner's association fees, if applicable. They must also maintain the home to a standard that complies with HUD or the lender’s guidelines. Failure to meet these obligations can lead to foreclosure of the reverse mortgage.

How do borrowers receive reverse mortgage funds?

Typically, borrowers can choose to receive reverse mortgage funds as a lump sum, monthly payments, a line of credit, or a combination of these options.

How does a reverse mortgage impact estate planning and heirs?

A reverse mortgage does not affect the borrower's ability to leave the home to their heirs, but the loan must be repaid when the borrower passes away. This can mean selling the home to pay off the loan or using other assets to settle the balance if the heirs wish to keep the home. It's essential for borrowers to discuss these details with their heirs as part of estate planning. Learn More

Can reverse mortgage borrowers rent out their homes?

Reverse mortgage borrowers are typically allowed to rent a portion of a home so long as they continue to live in the home, and it remains their primary residence. However, before making any rental plans, borrowers should review the specific terms of their loan agreement and consult with their lenders, as requirements can vary depending on the type of reverse mortgage and lender policies. Learn More

What are some common misconceptions about reverse mortgages?

Common misconceptions about reverse mortgages include the following beliefs:

Misconception 1: The lender takes ownership of the home. In reality, the lender will put a lien on the property, but the borrower retains the title and ownership throughout the duration of the reverse mortgage so long as they comply with the terms of the loan.
Misconception 2: Reverse mortgages can easily lead to foreclosure. As long as the borrower meets the loan’s requirements, such as paying property taxes and maintaining insurance, the home remains theirs. If the borrower fails to comply with the loan terms, the lender can foreclose on the property.
Misconception 3: Reverse mortgages are only for desperate homeowners in financial distress. In reality, reverse mortgage borrowers must demonstrate a certain level of solvency before they are granted the loan. Contrary to popular perception, many financially savvy individuals have used reverse mortgages as a strategic part of their retirement planning.
Misconception 4: Reverse mortgages are prohibitively expensive. While they do have unique costs, when managed properly, reverse mortgage expenses are comparable to those for other types of home loans.

How have recent regulatory changes improved the safety of reverse mortgages?

In the last several decades, regulatory changes particularly to the financial assessment portion of the application, have contributed to increased reverse mortgage safety. Home Equity Conversion Mortgage (HECM) borrowers receive protections associated with oversight from the U.S. Department of Housing and Urban Development (HUD). These protections include:

Lenders are now required to conduct financial assessments to ensure borrowers can meet their obligations, like property taxes and insurance.
Eligible non-borrowing spouses can remain in their homes upon the borrowing spouse's death.

How can I ensure that a reverse mortgage is the right choice for me?

Before deciding to apply for a reverse mortgage, you should have a complete understanding of your financial situation and long-term retirement needs. You also need to make sure you understand all the terms and conditions of the loan. As part of the loan application, you will be required to meet with a HUD-approved financial counselor. This counseling session is an excellent time to ask questions about the loan. It's also crucial to consider how your decision will affect your heirs and your ability to maintain your financial obligations related to the home. Learn More

How has public perception of reverse mortgages changed over the years?

Over the years, the sentiment surrounding reverse mortgages has shifted from skepticism to a more nuanced understanding, largely due to better consumer education and regulatory improvements. Initially seen as a last resort for financially distressed seniors, reverse mortgages are increasingly recognized as strategic financial planning tools. Learn More

How can a reverse mortgage improve financial flexibility in retirement?

A reverse mortgage can enhance financial flexibility in retirement by providing a lump sum, a line of credit, or regular monthly disbursements that do not require immediate repayment.* This allows retirees to supplement their finances without having to sell their home or dip into other retirement savings prematurely. Reverse mortgage proceeds may be used to cover unexpected expenses, fund home improvements, or even diversify investment portfolios, giving retirees more control over their cash flow and financial planning. ^{*The borrower must meet all loan obligations, including living in the property as the principal residence, maintaining the home, and paying property charges, including property taxes, fees, hazard insurance. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.}

Can a reverse mortgage be refinanced or modified?

Yes and no. Reverse mortgages can be paid off with a refinance like any other mortgage loan. However, it is not generally possible to modify an existing loan. To change the terms of the loan, in most cases, it will need to be refinanced. Refinancing can provide more favorable terms or additional funds if the home's equity has increased. It is also a way to add a new borrower to the loan, for instance, when a non-borrowing spouse reaches the eligibility age. Learn More

What happens to a reverse mortgage when the homeowner moves out or passes away?

When a reverse mortgage borrower passes away, stops living in the home as a primary residence, or sells the home, the loan becomes due and payable. There are several ways to resolve the loan, including selling the home or repaying the outstanding mortgage loan balance through other means. Learn More

What are the most significant advantages of getting a reverse mortgage?

The primary advantage of a reverse mortgage is the ability to access a portion of the home’s equity in cash payments or as a line of credit without making monthly loan payments.* Because reverse mortgages offer multiple payout options, borrowers are able to tailor the loan to a variety of financial needs and situations. Learn More *The borrower must meet all loan obligations, including living in the property as the principal residence, maintaining the home, and paying property charges, including property taxes, fees, hazard insurance. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

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