Frequently Asked Reverse Mortgage Questions

It sounds too good to be true, how does this work?
There are many misconceptions about reverse mortgages, so it is important to know the facts. A reverse mortgage or HECM (Home Equity Conversion Mortgage) is a federally insured loan that allows you to tap into the equity you have built up in your home.

Do I need to be suffering financial hardship to qualify?
No. It is another common misconception that reverse mortgages are only available to those who are struggling financially. In fact, many affluent borrowers who work with financial planners are using this as a tool to better their quality of life during retirement.

Do my children/family members lose their inheritance?
No. A borrower may designate an heir of their choosing. The heir(s) will inherit the home after the last surviving borrower passes away and may then choose to keep (by paying off the amount of reverse mortgage balance) or sell the home. Should they choose to sell, any remaining equity after paying off the loan (minus interest and/or fees) would be theirs.

If I have an existing mortgage, can I get a reverse mortgage?
Yes. Many borrowers use a reverse mortgage to pay off their existing mortgage and eliminate their monthly mortgage payments. In many cases, there is a line of credit left over for the borrower.

How much of a reverse mortgage do I qualify for?
The amount you can borrow is dependent on several factors including age, home appraisal value, and current interest rates.

Will a reverse mortgage affect my social security or medicare benefits?
You should always check with your tax specialist before applying, however, in general, a reverse mortgage does not affect Social Security and/or Medicare.

Will the bank own my home?
The bank does not take ownership of your home, they simply extend a loan to you. You continue to own and live in your home and are responsible for payment of property taxes, required insurance and any applicable HOA fees.

Are there any restrictions on how I can spend my loan proceeds?
There are no restrictions once any existing mortgages or liens are paid off. Many reverse mortgage borrowers use their cash payments to delay their Social Security payments, pay medical bills, travel, or simply supplement their retirement income.

How do I qualify?
You need to be 62 years or older and be living in the home as the primary residence. Vacation homes and investment properties do not qualify. You will need to complete a HUD-approved counseling session. You must be able to pay homeowner’s taxes, insurance, and any applicable HOA fees.

There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and are subject to change.

Borrowers should seek professional tax advice regarding reverse mortgage proceeds.