What is a Reverse Mortgage?

A reverse mortgage is a loan secured by home equity.  The loan need not be repaid until the end of the loan term, which is usually when the homeowner no longer occupies the home as a principal residence, sells the home, or dies.

During the loan period, the owner remains responsible for maintenance, insurance, and taxes for the home.  There are no limitations as to how money from a reverse mortgage may be used.

The borrower cannot be forced to sell or vacate the home if the money received from the loan exceeds the value of the home.  A surviving spouse who is a co-borrower cannot be forced to sell the house as long as he or she occupies the home as a principal residence.

When the borrower dies, the loan balance plus accrued interest becomes due and payable.  The heirs may repay the loan and keep the home, or sell the home, repay the loan, and keep the balance.  If the loan exceeds the value of the property, the heirs will owe no more than the value of the property, and no additional financial claims can be made against the heirs or the estate.

Who is eligible?

To qualify for a reverse mortgage, a homeowner (and any co-borrower) must be at least 62 years old, must own the home free and clear (or have a very low outstanding debt), and must occupy the home as their principal residence.

How much can be borrowed?

The amount one can borrow through a reverse mortgage varies with individual situations.  Is is based on the characteristics of the borrower(s), the property, and current interest rates or indexes.  Under the HUD Home Equity Conversion Mortgage (HECM), the maximum loan amount is based on the age of the youngest borrower, the expected interest rate, and the lesser of the appraised value of the house or the maximum loan claim amount for your area.  The Fannie Mae Home Keeper bases its maximum amount on the number of borrowers, the ages of the borrowers, and the adjusted property value, which is the lesser of the appraised value of the home or the loan limit, currently $203,150.

What payment options are available?

 The tenure option makes equal monthly payments.

 The term option makes equal monthly payments for a selected, fixed period of time.

 The line of credit option allows the borrower to draw up to a maximum amount of cash at times and in amount of his or her choosing.

 The modified tenure option sets aside a portion of the loan as a line of credit and pays the rest in the form of equal monthly amounts.

 The modified term plan sets aside a portion of the loan as a line of credit and pays the rest in the form of equal monthly payments for a fixed period.

The HECM offers all five options.  The Home Keeper offers tenure, line of credit, and modified tenure options.

The cost of the loan and the amount of money you receive many vary depending on the option and lender you choose.

Where to get help?

Contact your local Area Agency on Aging Reverse Mortgage Counselor:

Tina Miller

(828) 485-4216

EMail: Tina Miller