AARP defines a Reverse Mortgage as: A Reverse Mortgage is a loan against your home that you do not have to pay back for as long as you live there.
The Reverse Mortgage began as early as 1961. In 1989, FHA (Federal Housing Administration) insured the first HECM (Home Equity Conversion Mortgage) otherwise known as a Reverse Mortgage to Marjorie Mason of Fairway, Kansas. – The Reverse Mortgage was written to help Marjorie who was a widow stay in her home despite the loss of her husband’s income. To this day, Reverse Mortgages continue to help homeowners 62 years of age or older with many benefits.
Frequently Asked Questions
For homeowners age 62 or older, a reverse mortgage is a loan that converts the equity of your home into cash. That cash can be used for living expenses, consolidating debt, home improvements and even for buying another home. With a reverse mortgage, instead of making monthly mortgage payments, the lender pays you.
A home equity conversion mortgage (HECM) is a reverse mortgage that is insured by the Federal Housing Administration. Almost all reverse mortgages are home equity conversion mortgages.
To qualify for a reverse mortgage, you must meet the requirements set by the Federal Housing Administration:
The exact amount depends on the following:
As a safety feature, HUD (Dept of Housing & Urban Development) regulates the amount of money that can be withdrawn during the first 12 months of your Reverse Mortgage. After 12 months, the remaining funds are available to use anytime. This is to help preserve and grow your home equity for a longer period of time.
There are several options for how you can receive your funds.
Yes, you can use your reverse mortgage to pay off existing debt or a home equity loan or home equity line of credit.
No, the funds you receive are considered a loan, not income. Consult a licensed tax advisor for advice.
Yes, this may be an option if your home value has increased since your first reverse mortgage.
You can stay in your home and continue to receive your reverse mortgage funds. Be sure to involve your spouse when applying for a reverse mortgage, so you can both enjoy the benefits and be prepared for the future.