Reverse Mortgage

Reverse Mortgages

What is a Reverse Mortgage?

You've spent years sending monthly mortgage payments to the bank. Now it's time to get something back and put your money to work for you - tax-free.

With a reverse mortgage, 90% of which are federally insured, you do not make any payments. Instead, you receive either a lump sum or monthly payments based on the equity in your home. You never have to pay it back, as long as your home is your principal residence. Lenders recover their principal and interest when the home is sold. Any remaining value goes to the homeowner or his or her survivors. With the federally-insured option, you can never owe more than your home's value. Please read further for more details.
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Eligibility

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Conceived by the U.S. Department of Housing and Urban Development (HUD), the reverse mortgage was designed to be simple, with few eligibility requirements. These include:
  • All homeowners must be at least 62 years in age
  • The homeowners must occupy the property as a principal residence
  • There must be sufficient equity in the home (either no mortgage or small balances).
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Payment Plans

Choose from various payment options, such as...
  • Equal Monthly Payments: paid as long as at least one borrower lives and continues to occupy the property as a principal residence. (Tenure)
  • Equal Monthly Payments: paid throughout a fixed period. (Term)
  • Line of Credit - payments made at times and in amount of borrower's choosing until the line of credit is exhausted.
  • Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
  • Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
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How Much Money Can I Receive?

The amount you can borrow depends on several factors, including:
  • Your age
  • Current market interest rates
  • Fees
  • Appraised value of your home
  • FHA's mortgage limits for the area
In general, your borrowing limits increase as your age and home value increase and interest rates decrease.

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Types of Reverse Mortgages

There are several types of reverse mortgages. The three most popular types are described below.

HECM

The Home Equity Conversion Mortgage (HECM) is by far the most popular, accounting for 90% of the total reverse mortgage market. HECMs are insured by the federal government through the Federal Housing Administration (FHA), which is part of HUD, so homeowners will never owe more than their home is worth. If the sales proceeds fall short of the amount owed, HUD will pay the lender the difference. FHA collects an insurance premium from all borrowers to provide this coverage. Homeowners considering this program are required to receive consumer education and counseling by a HUD-approved Counselor.

Fannie Mae

Fannie Mae, the nation's largest investor of home mortgages, developed its proprietary Home Keeper® reverse mortgage to service homeowners whose needs could not be met by the HECM program. Examples include individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home.

The Fannie Mae product is not federally insured. The Home Keeper is available in every state to homeowners 62 years of age and older. Eligible property types include:
  1. Owner-occupied single-family homes
  2. Condominium units
  3. Units in qualified planned unit developments
  4. Properties held in trust
  5. Qualified leasehold properties
    6. .
Cooperative units, however, are not an eligible property type for Home Keeper.

Cash Accounts or Jumbo Loans

Another alternative to the HECM loan and Fannie Mae's Home Keeper is the conventional reverse mortgage. Although this product is not insured by the federal government, it features many of the same important safeguards for consumers, including mandatory counseling and asset protection.

Compared to the HECM, cash account reverse mortgages have much higher or no lending limits, and lower upfront costs. They also have options for adjustable rates as well as fixed.
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Mortgage Associates, Inc. is an FHA-approved Mortgage Broker (78225-0000-4) and is licensed in Maryland, Virginia (#MB-1038), Pennsylvania and Delaware. Mortgage Associates, Inc. is not affiliated with, or an agent or division of, a governmental agency or a depository institution.

Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, and home value. As a broker, we can arrange a loan with a third-party lender, but we cannot make, fund, or approve mortgage loans or guarantee rates. Not all programs are available in all areas.

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