What is a reverse mortgage?
A reverse mortgage is mortgage loan that enables you to access a portion of your equity based on your age and appraised home value. It’s a way for Oregon home owners 62 and older to turn equity into tax free cash without having to move or sell their home. Specifically a Home Equity Conversion Mortgage or HECM (reverse mortgage) is insured by the US government with HUD (Department of Housing and Urban Development), so you can rest assured that your cash flow will consistently come as promised.
Here’s how it works:
- With a reverse mortgage someone who qualifies can choose between a few tax free payment options. You can receive your payments on a monthly basis, in a lump sum, or as a line of credit.
- There are minimal income and credit checks.
- As long as you live in your home and adhere to your obligations under the reverse mortgage, you are not required to make any repayments
- Your Social Security and Medicare benefits will not be affected.
- Reverse mortgage lenders recover the loan amount, plus interest when the home is sold (because owners choose to move, or pass away*)
- Your heirs can have the remaining portion of the equity after the loan is paid in full distributed between them pursuant to your instructions
Keep in mind:
You will continue to own your home with a reverse mortgage*. However since you are no longer making monthly mortgage payments, the amount due on your home loan will grow over time. Basically you are borrowing against the equity, so it will decrease over time.
Even though you don’t have mortgage payments, you will still be responsible for paying homeowner’s insurance and property taxes during the loan period. You are responsible for the upkeep and repairs to the home. In fact if you were to fail these requirements, the loan could become due, and you’d have to pay the loan in full.
Do I qualify for a reverse mortgage?
You have to be at least 62 years of age. The home that you live in must be your primary residence for most of the year. You must also own the home outright or have a low enough balance on the existing mortgage that it can be paid off from the proceeds of the reverse mortgage.
You are also required to attend a HUD counseling session before signing the loan papers. You have the option to either go to the HUD counseling session in person or over the phone.
Does my home qualify for a reverse mortgage?
Your home will have to meet HUD standards to be able to qualify. The reverse mortgage must also be the only mortgage held against the residence. If you have a current mortgage on your home, it can be paid off with the proceeds that come with your reverse mortgage.
Examples of qualifying homes:
- Single Family One-Unit Residences
- 2-4 Unit Owner-Occupied Residences
Ask me if these residences qualify:
- Manufactured Homes
- Planned Unit
How is the loan amount determined?
The amount of the loan is based on:
- The age of the youngest borrower
- The appraised amount of the property
What are my reverse mortgage options?
HECM– The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is insured by the Federal Housing Administration (FHA). The FHA guarantees that HECM lenders meet their obligations, governs how much HECM lenders may loan to qualified borrowers, and limiting loan costs. Because this is a government insured program, loan counseling is required, by an approved HUD counselor.
HECM offers 4 draw options:
- Monthly payments for a fixed term, or life
- Line of credit
- Lump sum
- Any combination of the above 3
- Current interest rates
* Important Information (please read and understand!!): Reverse Mortgages are neither “endorsed” nor “approved” by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.