Retirement age Americans can receive greater financial security by enabling them to convert some of the equity in their home into cash.
A reverse mortgage loan allows you to turn some of the equity in your home into cash to improve your lifestyle in whatever way you choose. You will continue to live in your home, retain ownership and will not be required to make any monthly mortgage payments during the loan period. Instead of repaying the loan monthly, the loan balance is repaid when all borrowers have left the home. You will be required to pay for property taxes, home insurance and home maintenance.
How it Works
A HECM for Purchase loan combines a reverse mortgage with the equity from the sale of your previous home - or from other savings and assets - to buy your next primary home in a single transaction. Regardless of how long you live in the home or what happens to your home’s value, you only make one down payment toward the purchase.
The loan amount is based on the age of the youngest borrower, prevailing interest rates, and the value of the home you wish to purchase.
HECM for Purchase reverse mortgage are based on these important factors:
• You must be age 62 years old or older (a non-borrowing spouse may be under age 62)
• Your new home must be your primary residence (borrowers must occupy property within 60 days of closing)
• You must have sufficient down payment to purchase the new home
Does the bank own my home?
No. Reverse mortgage borrowers retain ownership of their homes. They are not relinquishing title or ownership using a reverse mortgage, but borrowing against the value of the home. A borrower may not lose their home under normal circumstances, as long as they comply with loan terms.
What are the different ways I can receive my reverse mortgage funds?
Reverse mortgage funds can be disbursed in a number of ways: full or partial lump sum, as a line of credit, through monthly payments, or a combination of any of these.
What if the loan amount ends up more than the value of the home? Who will be responsible for the loan?
Reverse mortgages are non-recourse loans. What this means is that if somehow the loan balance ends up surpassing the value of the home, the lender cannot collect more than the value of the home. Under the HECM program, the difference between the loan balance and the home value is covered by the Federal Housing Administration’s (FHA) insurance fund.
Will a reverse mortgage affect my Social Security, Medicare or pension benefits?
No, these benefits will not be impacted. Reverse mortgage funds are considered loan proceeds and not income. However, Medicaid and other income-based benefits† may possibly be affected. What’s more, the longer you wait to access Social Security benefits, the more you may receive. A reverse mortgage can help delay accessing Social Security in order to boost your lifetime retirement income*.