What is a Reverse Mortgage?   A reverse mortgage is a government insured loan program that allows senior homeowners who are at least 62 years old to convert a portion of the equity in their home into usable cash. You do not have to income qualify, You do not have to have good credit or any credit, Your homes does not have to be free and clear of a home loan, You do not pay income taxes on any payments you receive from the reverse mortgage, There are no other tax consequences, You do not forfeit any of your rights as the homeowner, You never have to move if you don't want to for the remainder of your life, You receive monthly payments as long as you live in the home, You can take a lump sum payment and smaller monthly payment, You or the heirs of your choosing decide when or if the home is to be sold, And, when the loan is repaid 100% of the remaining equity belongs to you, your heirs or your estate. The concept is simple. You have spent years building equity in your home by paying off (or paying down) your mortgage, and through the appreciation in your home’s value. A reverse mortgage simply allows you to withdraw a portion of that equity, use it any way that you like, stay in your home for as long as you like, and when you are ready to sell your home, or you have passed, the loan is repaid. Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower's principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home's value. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD's Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. Who can get a Reverse Mortgage? There are three basic requirements to qualify for a reverse mortgage: The youngest homeowner must be 62 years of age or older, The home must be your primary residence, and The type of home and condition of the property must meet standard HUD guidelines. Traditional mortgages are based on the homeowner’s ability to make monthly payments and for this reason things like credit, employment, income, and other assets are considered in the qualification process. A reverse mortgage does not require any form of monthly repayment and therefore none of those factors are considered. What you can do with money from a Reverse  Mortgage... You can take a lump sum and use it anyway you choose.  Give some to your adult children for a down payment on a home, Pay for you grandchildrens education, Take a cruise around the world. You can take some in cash and have some come to you monthly You can have the whole sum come to you in monthly payments You can designate some of your equity to be a line of credit to use in the future and still receive monthly payments If you don't want to stay in your present home you can use a Reverse Mortgage to purchase a different home. If you don't want to live the rest of your life in your present home, you can sell your home, use part of the money for a down payment on another home, and use a reverse mortgage on the balance. You can buy a single family residence, a condo or a townhome in an approved complex, or You can buy a duplex, triplex, or fourplex - live in one of the units and rent the other(s). If you live in a two-story home, a too-large one-story home and prefer to live in manageable size one-story home you can do this too with this reverse mortgage program. What kind of a loan is it? It is called an FHA Insured Reverse Mortgage, also known as a Home Equity Conversion Mortgage (HECM). FHA now offers two choices: The FHA Monthly Adjustable Interest Rate and The FHA Annual Adjustable Interest Rate. What is the interest rate on this loan? The reverse mortgage is the FHA monthly adjustable program. The rate on this program is determined by the 1-Year Treasury Bill, which is referred to as the loan index. To arrive at the actual rate, an amount equal to 1.50, referred to as the margin, is added to the index. For example, if the Constant Maturity Rate for the 1-Year US Treasury is 3.00, when you add the margin of 1.50 you have an interest rate of 4.50. How does the loan get repaid? Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower's principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home's value. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD's Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. Are you putting yourself, your family or your home in any risk?   In a nutshell, the answer is no, not in today's type of reverse mortgage.  The concept of a reverse mortgage was first developed by the private financial sector in the mid 70’s. There were many seniors who obtained an earlier version of this loan, and in many cases there were unfortunate consequences. The stories about the plight of these seniors persisted long after HUD adopted the program in 1989 and implemented standards and safeguards that have resulted in one of the safest most risk free financial transactions available today for seniors. Although AARP is not in the business of endorsing products and services, a great deal of credit goes to AARP for their role in encouraging HUD’s involvement, playing a vital role in providing education and counseling about the program and as a watchdog over the ethical practices of lenders.

Do some homework... While thousands of people are losing their homes to foreclosure, others are using their homes as a last resort, borrowing against the equity in their home - without making payments on the loan. Fewer people are getting reverse mortgages now because of the drop in home values, but many people who qualify, those at least 62 years old, are sitting on a pile of equity. Be sure to ask questions, check facts and figures and contact AARP, the American Association of Retired Persons for tips that can help. AARP's info on reverse mortgages   Reverse Mortgage Calculator How much cash could you get? Quickly determine with AARP's loan calculator.   Common Questions About Reverse Mortgages... Q: Do I lose title to my home? A: No, never.  When you die you home goes to the person or persons you have left it to in your will Q: Are reverse mortgages expensive? A: The government limits the fees that can be charged for reverse mortgages. Lenders can charge an origination fee of 1 1/2% to 2% of the loan amount, which is deducted from the loan amount.  The federal government charges 2% up front, deducted from your loan proceeds for the Mortgage Insurance. There is a cost for appraisal, credit report, and $125 for the mandatory credit counseling appointment required by the federal government. Q: Can I get a reverse mortgage on my mobile home or manufactured home? A: It would have to be on an approved HUD foundation and you would need title to the land it sits upon.  Unfortunately, if your mobile home or manufactured home is in a mobile home park where you pay space rent it does not meet the requirements for a reverse mortgage. Q: Is there any income minimum or maximum in order to qualify for a reverse mortgage? A: No. Seniors 62 years old and older can earn as much or as little as they like.  Q:  Are there any assest limitations to qualify for a reverse mortgage? A:  There is no mimumum or maximum asset value senior can have in order to obtain a reverse mortgage.  The only restriction is they cannot own more than four pices of real estate and still qualify for a reverse mortgage and one of those pieces of real estate has to be their primary residence.   More questions and answers will come in the near future. Please check back.