Reverse Mortgage FAQs

Quick Facts

HECM (Home Equity Conversion Mortgage) loans – also known as Reverse Mortgages – can be an important financial option for seniors, their family members, and financial professionals to consider as part of an overall retirement planning strategy or to help meet cash flow needs.

Over the past 50+ years the Reverse Mortgage has positively grown in popularity and has developed into an intelligent option to increase the financial independence for homeowners 62 years of age or older.

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

What is a Reverse Mortgage?

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.

What is a home equity conversion mortgage (HECM)?

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.

Am I eligible for a Reverse Mortgage?

To qualify for a reverse mortgage, you must meet the requirements set by the Federal Housing Administration:

  • You are age 62 or older
  • You have paid off your home or have a substantial amount of equity
  • The home is your primary residence
  • You meet with a reverse mortgage counselor approved by the Department of Housing and Urban Development
  • You continue to pay property taxes, homeowners insurance and maintenance costs for your home

How much money can I get?

The exact amount depends on the following:

  • Your age
  • The type of Reverse Mortgage selected
  • Current interest rates
  • Appraised value of your home
  • FHA (Federal Housing Administration) Lending Limit – as of Jan.1st 2018 the FHA limit is $679,650

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.

What are the differences between a reverse mortgage and a home equity loan?

There are several options for how you can receive your funds.

  • Monthly payments: A home equity loan or home equity line of credit requires that you make monthly principal and interest payments, while you do not make payments on a reverse mortgage.
  • Line of credit: A home equity line of credit is a set amount that decreases as you use those funds. If you receive your reverse mortgage funds as a line of credit, the amount will continue to increase.
  • Income and credit requirements: A home equity line of credit requires excellent credit and a low debt-to-income ratio, while a reverse mortgage does not have income or credit requirements.

Can I refinance my home using a reverse mortgage?

Yes, you can use your reverse mortgage to pay off existing debt or a home equity loan or home equity line of credit.

Do I have to pay taxes on my reverse mortgage funds?

No, the funds you receive are considered a loan, not income. Consult a licensed tax advisor for advice.

Can I refinance my reverse mortgage with another reverse mortgage?

Yes, this may be an option if your home value has increased since your first reverse mortgage.

What if my spouse or co-borrower passes away or moves out?

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.

We're here to answer all of your Reverse Mortgage questions

A friendly HECM expert is available to answer your questions at (503) 232-6659 or by email at info@equityaccessrm.com