Stay in your home with peace of mind

Many older Americans facing retirement want to find a way to increase their monthly income.  Today, more than ever before, there are new and innovative home ownership options that can help seniors optimize cash flow and promote peace of mind.

One option, the federally-insured,  Home Equity Conversion Mortgage (HECM) enables seniors to borrow against the equity in their home without repaying the debt for as long as they live in the house.  That’s the “reverse” part of this kind of mortgage loan.  Instead of making monthly payments, you can opt to receive them.  The loan proceeds can be used for any purpose, and taken out as a lump sum payment, fixed monthly payment, line of credit or as a combination.

The HECM reverse mortgage is the most popular reverse mortgage in America today.  Through the program, the U.S. Department of Housing and Urban Development insures mortgages that allow homeowners age 62 or over to convert their home equity into tax-free income.  The program has insured over 450,000 reverse mortgages since 1989.

When you take out a reverse mortgage, nothing happens to your home.  You remain the owner for as long as you live there, and you will never be forced to move.  If you decide to sell or move from your home, the outstanding balance of your reverse mortgage would become due, just as it would with a traditional mortgage.  Unlike a traditional mortgage, however, your balance can never exceed the value of your home when you sell it.

The maximum loan amount for a reverse mortgage is based on three primary factors:  the age of the youngest borrower, value of the home and current interest rates.  You must occupy the home as your principal residence for a majority of the year.  The property must be a single-family or two-to-four unit dwelling.  Town homes, detached homes, condominium units, planned unit developments and some manufactured homes are eligible.

The home doesn’t have to be owned free and clear to qualify for a reverse mortgage.  You may qualify for a reverse mortgage if the home has a remaining mortgage that can be paid off at the closing with proceeds from the reverse loan.

To be eligible for a HUD reverse mortgage program, HUD requires that the homeowner live in the home as his or her primary residence, be at least 62 years of age or older and own the home free and clear, or only have a low remaining mortgage balance that can be paid off at the closing with proceeds from the reverse loan.  As a key consumer protection, all borrowers are required to participate in a counseling session with a HUD-approved agency to determine if a reverse mortgage is the best option.

About the Author

Jane Alvis
Reverse Mortgage Consultant
Wells Fargo Home Mortgage