Also known as a home equity conversion mortgage (HECM), a reverse mortgage is a home loan program for homeowners 62 years of age or older. The loan allows the homeowner to tap into their home equity. Unlike other home loans, a reverse mortgage does not require monthly payments toward the mortgage itself. Although, the borrower is still responsible for making tax and insurance payments on the property.
EligibilityIt’s relatively easy to qualify for an HECM loan when compared to other loan products. The main eligibility requirements are:
- The borrower is at least 62 years old
- The property is being used as the borrower’s primary place of residence
- The property is a single family home, multi family home (4 family maximum), or a condominium/ manufactured home that has been approved.
- The property’s initial mortgage is paid off
- Homeowners insurance
- Property taxes
- General home upkeep
- HOA fees if applicable
Important FeaturesThe total amount a borrower can receive from a reverse mortgage is based on age, value of the home, and lender rates. Typically, the older you are and the higher the value of your home, then the more money you will see.
Withdraw optionsHECM loans offer four general options for withdrawing money:
- Taking out a lump sum
- Tenure annuity (receiving a monthly payment as long as the borrower lives in the house.
- Term annuity (receiving a monthly payment for a set period of time)
- Taking out a credit line that grows over time