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FHA Reverse Mortgage Info

An FHA reverse mortgage is designed for homeowners age 62 and older. The loan can work one of two ways: (1) Either convert the equity in your home into regular income payouts, or (2) as a line of credit that you can simply tap as you need it. The loan does not have to be paid back during the homeowner's lifetime. It can be repaid once the homeowner has passed away or no longer lives in the home, perhaps due to moving into a senior facility or with family. At that point, the family can use other funds to pay back the loan and maintain the home, or the home can be sold to repay the payments. Any proceeds above the amount owed to the reverse mortgage lender will belong to the other spouse or the estate, so any remaining equity can be transferred to heirs. It's important to note that this debt cannot be passed along to the estate or heirs; it must be settled once the owner is no longer in the home.5 

If there is more than one borrower, the age of the youngest borrower is used to determine the amount you can receive. The amount will be based on current interest rates, mortgage insurance premiums and the property's appraised value (up to $625,500).6 

To be eligible for an FHA reverse mortgage, you must be at least 62 years old, own your home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan. You also must show that you're able to pay ongoing property taxes and insurance, and you must live in the home. One additional requirement is that you will have to undergo counseling from a certified HECM counselor to discuss the financial implications - as well as potential alternatives - to obtaining a HECM before you can apply for the reverse mortgage. You can find a HECM counselor by calling (800) 569-4287.7 

Applicants may qualify for the FHA reverse mortgage program even if their original mortgage was not FHA insured. However, the home itself must either be a single family home or a two-to-four unit home in which you live in one of the units. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible. With a reverse mortgage, you are required to pay real estate taxes, utilities and any applicable hazard and flood insurance premiums.8 

You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading their free booklet, Use Your Home to Stay at Home. To learn more about the FHA's HECM program, visit the HECM home page at www.HUD.gov.


From Andrew Rafal's newsletter - arafal@strategyfinancialgroup.com.