Mortgage 101: What You Need to Know about Reverse Mortgages

For many senior citizens, reverse mortgages offer financial security during their golden years.

Due to upheavals in the stock market during the past two decades, as well as the fact that many employers no longer offer pension plans, many Americans face retirement with significantly less money than they had planned. Most senior citizens who own their homes have a significant amount of equity in their homes, but hesitate to tap into it with home equity lines of credit because they do not want to get tied into monthly payments. For many of these senior citizens, reverse mortgages may provide a lifeline for a financially secure retirement.

The Facts about Reverse Mortgages

Reverse mortgages allow seniors to access the equity in their homes without the burden of having to make monthly loan payments as long as they live in their home. The most popular type of reverse mortgage is the Home Equity Conversion Mortgage Program (HECM), which is a program administered by the US. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA).

To qualify for a HECM reverse mortgage, some of the requirements you must meet include:

  • The borrower(s) must be 62 or older
  • The borrower must go through counseling with a HUD approved counselor
  • The borrower must meet other lending requirements.

In order to protect the spouses who are not included on the deed of their homes, HUD has instituted protections so they will not have to make payments in the event the individual who secures the reverse mortgage dies.

To learn more about reverse mortgages, contact a local mortgage broker today.