All About Reverse Mortgage

What is a reverse mortgage?
A reverse mortgage is a loan that pays you instead of you paying into it. It’s a way for retired Oregon home owners to be able to use the equity they’ve built up in their homes and turn that into tax-free cash, all without having to move or sell your home. A reverse mortgage is insured by the US government with HUD (Department of Housing), so you can be assured that your cash flow will consistently come as long as you need it.
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 no required income or credit checks.
  • As long as you live in the home 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 will have all the equity associated with the property disturbed between them, once the loan is paid in full.

Keep in mind:
You will continue to own your home with a reverse mortgage. However since you are not longer making and monthly mortgage payments, the amount due on your home loan will grow over time. Basically since you are barrowing 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 will also have to be responsible for the up keep and repairs to the home. In fact if you were to fail to these requirements, it could lead to the loan becoming due, and you’ll 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.
Anyone who is listed on the title of the home applying for a reverse mortgage must be listed on the application. You are also required to attend a free HUD counseling session before signing the loan papers. You have the option to either go to the HUD counseling classes 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 your lender if these residences qualify:

  • Manufactured Homes
  • Condominiums
  • Planned Unit
  • Developments

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
  • No income or credit is required. 

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 Oregon HUD counselor.
HECM offers 4 draw options:

  1. Monthly income for a fixed term, or life
  2. Line of credit
  3. Lump sum
  4. Any combination of the above 3