Reverse Mortgage Factsheet
What is a HECM reverse mortgage?
A reverse mortgage, or Home Equity Conversion Mortgage (HECM), is a government-insured program which allows homeowners to borrow against equity in their homes.
Who is eligible for a HECM reverse mortgage?
To borrow under the HECM program, you must have equity in your primary place of residence, and one of the borrowers needs to be aged at least 62 years. Loan conditions and payments are calculated based on the younger borrower’s age.
Do I need a good credit rating to get a reverse mortgage?
A reverse mortgage is only based on your equity in your home and the borrower’s age(s). Income and credit are not considered. Reverse mortgages are made available to seniors of all income levels.
Can I get a reverse mortgage if there is currently a mortgage on my home?
If there is a conventional forward mortgage on your home then a portion of the reverse mortgage can be used to pay it off.
Do I keep the title to my home?
Just like a forward mortgage the title is held in the name of the homeowner(s). If the reverse mortgage becomes due then the loan must be repaid, but the title is never negotiated.
Do the conditions of a reverse mortgage restrict how I spend the money?
If there is a previous mortgage, then once it is paid out and the reverse mortgage becomes the primary debt against the home, you can spend the proceeds however you wish. However you must remember to pay taxes and insurance in accordance with the conditions of the loan.
What are my responsibilities under a Reverse Mortgage?
You are required to live in the home as your primary place of residence for the duration of the loan, and be responsible for property taxes, insurance and maintaining the property in good order.
What upfront costs will I need to pay to get the loan?
Many borrowers choose to finance the bulk of the upfront costs for the reverse mortgage with the loan itself. Aside from those costs you may be required to pay for the mandatory counseling and an upfront deposit for the appraisal of the property.
What happens if the amount I owe is more than my home is worth?
Because the loan is non-recourse then you are never personally liable for the loan to an amount that is more than the value of the home.
If I live longer than expected, can the lender evict me from my home?
There is no time limit for how long you can stay in your home while there is a reverse mortgage against it. You still own your home and you can’t be evicted as long as you abide by the conditions of the loan.
How and when is the loan repaid?
The loan is due when the last borrower sells the home, or permanently leaves the home or passes away. At that point the borrower, or their estate, pays all payments due under the loan and the loan fees, plus interest.
Is my estate liable for the reverse mortgage?
Reverse mortgage loans are non-recourse. That means that the amount payable is limited to the value of the home. If your heirs want to keep the home and the balance of the loan is more than the home’s value when the loan is due, they only need to pay 95% of the appraised value. If the balance of the loan is less than the value of the home, they can choose to pay the balance and keep the home.