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Reverse mortgages are increasing in popularity with seniors across America. If you are 62 years and older, you may qualify for this loan that converts your home equity into spendable cash. Contact Larry Paul today to discuss your retirement plans. We would love to include all of your trusted advisors in the conversation to make sure that everyone on your team is working towards the same goal: to provide you with the most financial freedom, enjoyment and peace of mind in your retirement years.
Our goal is that you become fully informed of this versatile mortgage loan and make the appropriate decision for you and your family given your unique situation.
It can be scary making a major decision about one of your biggest investments, the place that means the most to you. Deciding whether a reverse mortgage loan is right for you often requires education and expert advice. We hope the following information is beneficial as you explore whether a reverse mortgage loan is right for you.
A reverse mortgage loan is a unique loan that allows homeowner(s) 62 years of age and older to draw on the value of their home, which is paid to the homeowner(s) in a variety of payout options or used as a line of credit. One of the unique features of a reverse mortgage loan is that it does not require repayment until the homeowner(s) no longer reside in the residence, the last surviving borrower passes away, or does not comply with the loan obligations. An example of reverse mortgages or HECM guidelines/obligations are paying property taxes and insurance and maintaining the property to FHA guidelines (if the reverse mortgage loan is FHA's HECM loan).
There are different types of reverse mortgage loans. The two most popular are the HECM loan (Home Equity Conversion Mortgage, insured by the FHA) and jumbo or proprietary reverse mortgage loans¹ for high-value homes.
We are reverse mortgage loan specialists and are here to assist you as you explore your options and whether a reverse mortgage loan is right for you. Our goal is that as you learn more about the reverse mortgage loan you have all the information you need to make the best decision for you and your family. We aim to provide world-class service from start to finish.
To qualify for a reverse mortgage loan there are some basic requirements, such as:
Keep in mind that each lender may have different qualification requirements based on multiple factors; like your financial situation, age, interest rates, home value, and other factors. Also, you do not need to pay off your home to qualify for a reverse mortgage loan.
The cash you can potentially receive is based on the age of the youngest borrower, the current expected interest rate, the mortgage option selected, and the appraised value of the home. For instance, an older individual with a higher value home typically will be eligible for more than a younger person with the same home value at the same expected interest rate. How much money you can take in the first year is limited. For more information on distribution limits, visit our reverse mortgage loan FAQs page.
Contact us today for your no-obligation reverse mortgage loan evaluation.
Deciding whether a reverse mortgage loan is right for you can be a daunting task, but we are here to hopefully alleviate some confusion and provide you with all the information you need to make the right decision for you and your family.
Some of the key features of the reverse mortgage loan are as follows:
Your home mortgage balance does not have to be paid off at the time of application to qualify. However, the reverse mortgage loan proceeds you receive must be used to pay off the existing mortgage or liens (if there is a mortgage balance owing). You will continue to hold title to your home subject to the mortgage securing the reverse mortgage loan.
Homes that are eligible for a reverse mortgage loan include single-family homes, detached homes, townhouses, and two-to-four-unit properties that are owner-occupied. Condominiums must be FHA-approved for the HECM loan and some manufactured homes are also eligible. Contact your Reverse Mortgage Loan Originator for more details on manufactured home eligibility.
If you outlive the loan, you will not have to repay the lender if you have a HECM loan. As long as one of the borrowers on the loan note (or original non-borrowing spouse) lives in the home, continues to pay the taxes and insurance and maintains the home in good condition and complies with the loan terms, you will not need to repay the loan. Once the last surviving borrower passes away (and any non-borrowing spouse), the home is sold or the obligations of the loan are not met, the loan must be repaid.
If a HECM, once the last surviving borrower dies, sells your home, or no longer resides there as the primary residence, you or your estate is responsible for the repayment of the money you received from the reverse mortgage loan, plus interest and other fees. Any remaining equity belongs to either you or your heirs. A “non-recourse” clause prevents you or your estate from being responsible for more than the value of your home when the loan is repaid. If the ending loan balance exceeds the home's value, the estate (heirs) can sign a deed in lieu of foreclosure releasing the property or, pay 95% of the home's appraised value, less customary closing costs & real estate commissions.
HUD advises against using any service that charges a fee (except required HECM counseling) or any service that requests a lender referral fee to obtain a reverse mortgage loan. HUD provides this information free of charge and can direct you to HUD-approved housing agencies that offer approved reverse mortgage loan counseling or additional services that are free or have a minimal cost.
There is typically a reverse mortgage loan (HECM) counseling fee that ranges from $125 - $150. If the borrower cannot afford this fee, some counseling agencies will waive the fee for qualified applicants. You can find a HUD-approved housing counseling agency near you by calling 1-800-569-4287 toll-free.
Adjustable interest rate reverse mortgage loan payments can be received in one of five ways:
Reverse mortgage loans are unique because they allow the borrower to receive loan proceeds that do not require immediate repayment as long as you remain in your home as your primary residence, do not sell your home, at least one borrower lives in the home, you meet the basic income and credit standards, and follow loan guidelines.
On the other hand, obtaining a home equity loan (or home equity line of credit or second mortgage) requires that you have sufficient income to cover the debt- plus, you must continue to make monthly principal and interest mortgage payments.
With a reverse mortgage loan, you must meet basic income and credit guidelines but you do not make monthly principal and interest payments. Remember that you must continue to pay all property-related fees, taxes, and homeowner’s insurance and maintain the property in good condition.
Necessity is the mother of invention and the first reverse mortgage loan is no exception. Today, many use the terms reverse mortgage loan and HECM or Home Equity Conversion Mortgage interchangeably. But are they the same? Not necessarily.
The first reverse mortgage loan was originated in 1961 by Deering Savings & Loan. Nelson Haynes who worked for the lender learned his former high school football coach had passed away and his widow was struggling to find a way to keep the home. The widow, Nellie Young, took the very first reverse mortgage loan and became part of mortgage history in the process.
In the ensuing years, interest grew in the concept of a ‘reverse mortgage’ loan which allowed the homeowner to defer payments until a later time -usually upon their death. Private lenders stepped into this niche market, however some of these loans relied upon ‘equity-sharing’ schemes in addition to accrued interest on the money borrowed.
Recognizing the increasing need for older homeowners to secure their retirement with home equity Congress began exploring the concept of reverse mortgage loans. In 1969 the first hearing was held in the Senate Committee on Aging to discuss the government’s possible role in such a program.
It wasn’t until nearly two decades later that the Home Equity Conversion Mortgage was formalized by Congress in 1987 as part of an insurance bill. It began as a pilot program for the nation’s first federally-insured reverse mortgage loan then later became a permanent fixture in mortgage lending. In formalizing a government-insured and supervised loan numerous consumer protections were included.
Today, many refer to the Home Equity Conversion Mortgage or HECM as a reverse mortgage loan - a name that stuck, since payments are ‘reversed’ with the borrower not being required to make payments but instead the lender pays the homeowner.³ However, not all reverse mortgage loans are created equal. HECMs are federally-insured and have unique eligibility requirements and guarantees. Private reverse mortgage loans¹ offer access to one’s home equity with no required monthly payments as well, albeit with different terms and conditions.*
The good news is that while only the HECM is insured by the Federal Housing Administration (FHA) and supervised by the Department of Housing and Urban Development (HUD), private reverse mortgage loans are closely monitored by regulators. It is recommended that homeowners thoroughly research their options on which loan may best suit their needs. Costs, features, eligibility rules, insurance, and interest rates should be considered.
Whether it’s a HECM or a reverse mortgage loan, both reverse the typical mortgage and provide eligible homeowners a flexible means to tap into their home’s value.
The origins and history of reverse mortgage loans reveal a loan product that has evolved dramatically over the last 40 years.
The first reverse mortgage loan was written in 1961 by Nelson Haynes of Deering Savings & Loan (Portland, Maine) to Nellie Young, the widow of his high school football coach helping her to stay in her home despite the loss of her husband’s income.
The need for reverse mortgage loans was further developed in the 1970’s with several private banks offering reverse-mortgage-style loans. These programs gave seniors money from their home but did not afford the protections of today since no FHA insurance had been put in place. Since 1989 reverse mortgage loans have grown in popularity.
In the early 1980s, the U.S. Senate Special Committee on Aging issued a report stating the need for a standardized reverse mortgage loan program. Other committees throughout the mid-’80s cited the need for FHA insurance and uniform lending practices. In late 1987 Congress passed the FHA insurance bill that would insure reverse mortgage loans. On February 5, 1988, President Ronald Reagan signed the FHA Reverse Mortgage loan bill into law. In 1989 the first FHA-insured HECM was made to Marjorie Mason of Fairway, Kansas by the James B Nutter Co.
Since 1989 reverse mortgage loans have grown in popularity, especially in the mid to late 1990s. Despite economic upheaval and forward mortgage lending issues, reverse mortgage loans have continued to grow as a safe, government-insured loan allowing seniors to access a portion of the value of their homes while not having to make a monthly mortgage payment.³
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax or financial advice. Consult with a qualified attorney, accountant or financial advisor for additional legal or tax advice.
* There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Larry Paul
National Manager, C2 Reverse
NMLS #829110 | DRE #01183375
2552 White Road, Unit B
Irvine, CA 92614
Phone: (714) 210-5323
C2 Reverse, a division of C2 Financial Corp., NMLS #135622 | BRE #01821025
