Here are some key details about reverse mortgages:

  1. Eligibility Criteria:
    • Homeowners must be at least 62 years old.
    • The home must be the primary residence.
    • The homeowner should have sufficient equity in the home.
  2. Loan Types:
    • Home Equity Conversion Mortgage (HECM): Insured by the Federal Housing Administration (FHA), this is the most common type of reverse mortgage.
    • Proprietary Reverse Mortgage: Offered by private lenders and not backed by the government. It may have different eligibility requirements.
  3. Loan Amount:
    • The loan amount is based on factors such as age, home value, current interest rates, and the type of reverse mortgage.
  4. Repayment:
    • No monthly mortgage payments are required.
    • The loan is typically repaid when the homeowner sells the home, moves out, or passes away.
    • The repayment amount is the loan amount plus accrued interest and fees.
  5. Interest Rates:
    • Interest rates can be fixed or adjustable.
    • Interest accrues on the outstanding loan balance over time.
  6. Fees:
    • Closing costs may include origination fees, appraisal fees, mortgage insurance premiums, and other charges.
    • Some fees can be financed into the loan.
  7. Homeownership Responsibilities:
    • Homeowners must continue to pay property taxes, homeowners insurance, and maintain the property.
  8. Loan Disbursement Options:
    • Lump Sum: Receive a one-time payment.
    • Monthly Payments: Receive a steady stream of income.
    • Line of Credit: Access funds as needed.
    • Combination: Choose a combination of the above options.
  9. Impact on Heirs:
    • Heirs have the option to repay the loan and keep the home or sell the home to repay the loan.
    • If the home is sold, any remaining equity goes to the homeowner or heirs.
  10. Counseling Requirement:
    • Homeowners are required to undergo counseling with a HUD-approved counselor before obtaining a reverse mortgage.
  11. Protection Against Negative Equity:
    • HECM loans include a provision that ensures the homeowner (or their heirs) will not owe more than the home’s appraised value.

It’s crucial for individuals considering a reverse mortgage to thoroughly understand the terms, benefits, and potential risks. Consulting with a qualified financial advisor and attending mandatory counseling sessions is highly recommended to make informed decisions based on individual circumstances.