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For qualified seniors 62 and older, a reverse mortgage, the most common of which is the HECM (Home Equity Conversion Mortgage), is a way to turn a portion of the equity in your home into cash without having to make monthly mortgage payments. As long as all loan terms are met, the loan becomes repayable when the last borrower leaves the home. As part of the loan, the borrower is required to continue paying property taxes and insurance and maintain the home. According to the US Department of Housing and Urban Development, more than a million households across the nation are using a HECM reverse mortgage insured through the Federal Housing Administration (FHA) that enables seniors to help manage their ever-increasing living expenses.
Contrary to popular belief, heirs can inherit a home that has a Reverse Mortgage on it, just like they would with a traditional mortgage. They can be given up to six months with two 90-day extensions options to decide, if needed, if they will sell it, sign it over as a deed-in-lieu of foreclosure, or satisfy the outstanding balance. An appraisal is ordered to help in making that decision to see if there is equity left. Heirs can purchase the home for 95% of the appraised value or the mortgage balance, whichever is lower.
A HECM for Purchase reverse mortgage loan may help you buy your next home without required monthly mortgage payments, except for taxes, insurance, and general maintenance. The HECM for purchase is a reverse mortgage loan insured by the Federal Housing Administration (FHA) that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long you live in the home or what happens to your home's value, you only make one initial investment (down payment) towards the purchase. Similar to all other reverse mortgages, the loan becomes repayable when the last borrower no longer lives in the home as their primary residence.

Benefits

Take advantage of some of these reverse mortgage benefits that increase your purchasing power and flexibility.

  • No monthly mortgage payments except for taxes, insurance, and maintenance
  • Growing line of credit (applies to unused funds)
  • Increased discretionary cash flow
  • Can sell YOUR home at any time
  • Does not require payment until last living borrower permanently leaves the home

Eligibility

Eligibility Requirements to Purchase

  • One borrower must be 62 years or older
  • Purchased home is required to be your primary residence
  • New property must be: single-family home, 2-4 unit dwelling or FHA approved condo
  • Must receive reverse mortgage counseling from a HUD approved counseling agency
  • You must have an adequate down payment for your new home or a gift from a family member

FAQ

What if I live in Florida for half the year?

That's fine, you just need to live in your primary residence for six months and a day.

Will your children receive more or less after you pass away, than they would without the reverse mortgage?

It depends on what you do with your overall finances. Some heirs may will receive more by the borrower being more efficient with the use of their entire portfolio of assets.
Note: This is not financial advice. Please consult your financial advisor for your specific situation.

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