Heirs also can choose to pay off the reverse mortgage or refinance if they want to keep the property. If not, or if the loan is actually worth more than the house, the heirs aren’t required to pay the difference. If there’s any equity left over, it goes to the estate. When that time comes, proceeds from the home’s sale are used to pay off the debt. You get to keep the title to your home the whole time, and the balance isn’t due until you move out or die. That means the amount you owe grows over time, while your home equity decreases. The interest and fees associated with the loan get rolled into the balance each month. The lender actually makes payments to you: You can choose to receive a lump sum, monthly payments, a line of credit or some combination of those options. At the end of the term, the loan is paid down to $0.Ī reverse mortgage works in, well, reverse. Normally, when you take out a mortgage loan, the bank gives you a lump sum that you pay back with interest over time. You’re probably wondering how it’s possible to get a mortgage with no payments. If you are approved for a reverse mortgage, you have to sit through an information session given by an approved HECM counselor. You must stay current on the property taxes, insurance and any homeowners association (HOA) fees.You will be subject to a credit check and other eligibility requirements.The property has to be your principal residence and you can’t be delinquent on any federal debt.You need to own the home outright or have paid down a considerable amount of the mortgage.In addition to being at least 62 years old, there are a few other requirements to get an HECM: If a borrower fails to repay their loan, those reserves are drawn against to pay back the lender. These loans are backed by the Federal Housing Administration (FHA) borrowers pay an insurance premium in order to participate, which is used to fund FHA reserves.
The most common type of reverse mortgage is known as a home equity conversion mortgage (HECM). However, unlike a regular mortgage, you aren’t required to make monthly loan payments you’ll repay the loan when you or your heirs sell the house. If you’re a property owner who is at least 62 years old, you can borrow against your equity to get cash or a line of credit from a lender.
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