Modern Day Retirement Planning
A Reverse Mortgage is a loan that enables some homeowners access to wealth, tax efficiently, without selling the home or giving up ownership. Reverse Mortgage loans are designed to provide increased liquidity, accessibility and flexibility for homeowners 62 years of age or older.
Reverse Mortgages, also known as, HECM loans (Home Equity Conversion Mortgages) have helped more than one million Americans¹ nationwide access their home equity to find greater security in retirement. The loan can be used in a number of ways, many of which are focused on assisting adults in achieving their financial goals so that they can enjoy retirement.
The HECM loan has been improved over the years so that it can better meet the needs of older adults. Today, there are important safeguards in place to ensure that it can continue to help consumers for years to come.
Existing Protections You Can Always Rely On
No Monthly Mortgage Payments
A reverse mortgage does not have to be repaid until you sell, move or no longer live in your home.*
No Surprise Costs
During the application process, you’ll receive a clear and detailed breakdown of all fees and closing costs, including the total loan costs over the projected life of the loan.
HECMs are non-recourse loans. After the loan is repaid, any remaining equity belongs to you or your heirs. This means that you can never owe more than the value of your home at the time you or your heirs sell your home to repay your reverse mortgage. With a HECM, the reverse mortgage debt may be satisfied by selling the home to pay the lesser of the mortgage balance or 95% of the current appraised value of the home.*
To ensure that you understand all aspects of a reverse mortgage, you’re required to have a counseling session with an independent counselor who’s approved by the U.S. Department of Housing and Urban Development (HUD). It usually takes about 60 to 90 minutes and can be done in-person or over the phone. (Some states require face-toface counseling.)
Limitation On Fees
Origination fees are regulated by the U.S. Department of Housing and Urban Development (HUD), and cannot exceed HUD limits. In addition, origination fees and closing costs may be financed as part of the reverse mortgage, so out-of-pocket expenses can be minimal.
No Prepayment Penalty
Although a HECM loan is not due until the borrower permanently vacates the home, it can be paid off at any time, with no additional fees.
Insured by the Federal Housing Administration (FHA) to protect lenders and borrowers alike. This insurance guarantees you will receive your loan proceeds as agreed upon with the lender at the closing of the loan.
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
¹Annual HECM Endorsement Chart. NRMLA. https://www.nrmlaonline.org/2018/09/19/annual-hecm-endorsement-chart. August 2018.
2Borrower must continue to pay property taxes and homeowner’s insurance, maintain the home, and otherwise comply with the loan terms.
3If you qualify and your loan is approved, a HECM Reverse Mortgage must pay off your existing mortgage(s). With a HECM Reverse Mortgage, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must also occupy home as primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, or defaults on taxes and insurance payments, or does not comply with loan terms. A Reverse Mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). These materials are not from HUD or FHA and were not approved by HUD or a government agency.
Terms and conditions are subject to agency and investor guidelines in effect at the time of application. Loan programs may change or be eliminated without notice or obligation. Not all borrowers qualify for all programs. All property taxes, homeowners’ insurance, applicable maintenance fees and HOA dues are the responsibility of the borrower. Failure to remain current on all property charges can cause the reverse mortgage to go into default and will result in foreclosure. Minimum age of all borrowers at time of closing is 62. Primary residences only. This material is not from HUD or FHA and it was not approved by the department or any government agency. Not all products and options are available in all states. This is not a loan commitment. All loans subject to approval.
1. At conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
2. Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees for the reverse mortgage, all or any of which will be added to the balance of the reverse mortgage loan.
3. The loan balance grows over time & interest is charged on the outstanding balance
4. Because the person retains title and is therefore remains responsible for property taxes, insurance, and maintenance and related taxes. Failure to pay these amounts may cause the reverse mortgage to become due immediately and may subject the property to a tax lien or other encumbrance or to possible foreclosure.
5. Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full repayment, consult with a tax advisor.