Did you know that the reverse mortgage program has been in existence since 1989? A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), has been giving seniors the ability to access the equity that is in their home for over 20 years.
A reverse mortgage has been a federally insured reverse mortgage loan program since 1989. In that year, President Ronald Reagan signed the Housing and Community Development Act which added federal insurance to the reverse mortgage loan program. The reverse mortgage loan has been increasing in popularity with seniors who have equity in their homes and want to supplement their income without having to tap into retirement savings or delay collecting Social Security to maximize their benefits.
The government does not actually offer the reverse mortgage loan, but it regulates the products and requirements. The area of the government that does this is the Department of Housing and Urban Development (HUD). HUD oversees the lenders that offer the reverse mortgage loan program and sets high standards that lenders need to follow in order to offer the HECM product. HUD is also in charge of developing the guidelines for the counseling, which is an important step in the reverse mortgage process. All borrowers on the loan must attend third party counseling by a HUD-approved counselor.
The reverse mortgage is non-recourse loan which means if you owe more than the home is worth when the loan comes due, the government will cover the difference.
Reverse Mortgage Options
There are two different loan options with a reverse mortgage: the reverse mortgage fixed and the reverse mortgage line of credit.
Reverse mortgage fixed- The reverse mortgage fixed rate option is designed for people requiring a greater amount of money available to them to pay for mandatory obligations like their current mortgage balance, property liens, repair requirements and reverse mortgage loan closing costs. With this option the funds will be received in one lump sum at closing and the low fixed rate remains the same through the life of the loan.
Reverse mortgage line of credit – The other option is the reverse mortgage line of credit. This option offers lower closing costs by limiting your initial money disbursement for the first year based on the FHA pre-determined limit. Other options to receive the proceeds are smaller amounts monthly, a full draw on your line of credit at closing, accessing your line of credit when you need or any combination of these.
The Reverse Mortgage Process
The process of the reverse mortgage is pretty simple. At One Reverse Mortgage the process is a simple and easy 5 step process. Plus your licensed expert will be with you every step of the process to answer questions you may have and guide you through.
Talk with us about your situation – We want to understand your goals so we can help you determine if the reverse mortgage program makes sense for you. Learning about the program from the comfort of your own home is a good way to start; you can request a free guide and DVD that will be shipped to you.
Complete your application and attend counseling – Your licensed expert will review the application with you and provide you with the information you need to make your counseling appointment.
Appraisal – Your home will be appraised by an independent FHA approved appraiser. After appraisal, the loan will move to the underwriting process.
Closing and disbursement – There is no need to leave your home to close your loan. We will come to you and you will close in the comfort of your home.
Repayment – You are not required to make a monthly mortgage payment* as long as the property remains your primary residence. You will be responsible for payment of taxes, insurance and maintenance. The balance of your reverse mortgage becomes due when the borrower(s) no longer occupies the home or passes away. Your heirs do not assume the debt but have the option to keep the home through purchase or refinance if they choose.
*Homeowner is still responsible for taxes, insurance, and property maintenance.