A reverse mortgage enables older homeowners (62+) to
convert part of the equity in their homes into tax-
without having to sell the home, give up title, or take on a
new monthly mortgage payment. The reverse mortgage is
aptly named because the payment stream is “reversed.”
Instead of making monthly payments to a lender, as with a
regular mortgage, a lender makes payments to you.
You may qualify for a reverse mortgage even if you still owe
money on an existing mortgage. However, the reverse
mortgage must be in a first lien position, so any existing
indebtedness must be paid off. You can pay off the existing
mortgage with a reverse mortgage, money from your savings,
or assistance from a family member or friend. For example,
let's say you owe $100,000 on an existing mortgage. Based
on your age, home value, and interest rates, you qualify for
How to Eliminate Mortgage for Life?
$125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish. If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your own savings to get the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage. On the other hand, you won't have a monthly mortgage payment anymore.
Learn How to Stop Mortgage Payment
1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner convert the equity in his or her home into
cash. The equity built up over years of mortgage payments can be paid to the homeowner: in a lump sum, in a
stream of payments, or as a supplement to Social Security or other retirement funds. Unlike a traditional home
equity loan or second mortgage, no repayment is required until the borrower no longer uses the home as his or her
principal residence. The United States Department of Housing and Urban Development’s (HUD) reverse mortgage
provides these benefits, and it is federally insured as well.
2. Does my loved one qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower
be 62 years of age or older; have a very low outstanding mortgage balance or own his or her home free and clear;
and that he or she meets with a HUD-
HUD reverse mortgage will mean.
3. Can my loved one apply if he or she didn’t buy his or her present house with FHA mortgage
insurance?
Yes. While your loved one’s property must meet FHA minimum standards, it doesn’t matter if he or she didn’t buy it
with an FHA-
4. What if my loved one owns a condominium, not a single-
He or she can still qualify for HUD’s reverse mortgage program. An eligible property must be his or her principal
residence, but can be a single-
a manufactured home (mobile home); or a unit in FHA-
meet FHA minimum property standards, but he or she can fund repairs from his or her reverse mortgage.
5. What’s the difference between a reverse mortgage and a bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, your loved one must have sufficient income to
qualify for the loan, and he or she is required to make monthly mortgage payments. A reverse mortgage works
differently. The reverse mortgage pays your loved one, and it is available regardless of his or her current income.
He or she doesn’t make payments, because the loan isn’t due as long as the house remains your loved one’s
principal residence. Like all homeowners, your loved one is still required to pay real estate taxes and other
conventional payments like utilities, but with an FHA-
forced to vacate his or her house because he or she missed a mortgage payment.
6. Can the lender take my loved one’s home away if he or she outlives the loan?
No. Your loved one cannot outlive the loan agreement, and no debt from a reverse mortgage will be passed along to
the estate or heirs. Your loved one cannot be forced to sell his or her home to pay off the mortgage loan even if the
loan balance grows to exceed the value of the property. And, HUD’s Federal Housing Administration guarantees that
your loved one will receive all the payments that are owed to him or her.
7. Will my loved one still have an estate that he or she can leave to heirs?
When your loved one sells his or her home or no longer uses it as a primary residence, your loved one or his or her
estate must repay the cash received from the reverse mortgage, plus interest and other finance charges. All
proceeds beyond what he or she owes belongs to your loved one or his or her estate. This means the remaining
equity in your loved one’s home can be passed on to his or her heirs. None of your loved one’s other assets will be
affected by HUD’s reverse mortgage loan. No debt will ever be passed along to the estate or heirs. Your loved one
retains ownership of his or her home, and may sell or move at any time.
8. How much money can my loved one get from his or her home?
A borrower who uses an FHA-
amount based on a formula that includes a Maximum Claim Amount. In general, this means the maximum amount
your loved one can receive will be determined by factors including his or her age and the appraised value of the
property (or the maximum FHA mortgage amount for your loved one’s area, if lower). You and your loved one should
discuss the formula with his or her lender and his or her HUD-
9. What if my loved one wants to take out more equity from his or her home than the
FHA-
mortgage limits for the area?
Like FHA’s home mortgage programs, HUD’s reverse mortgage is primarily intended for
low-
families. For instance, FHA maximum home mortgage amounts range from $78,660 to $155,250, depending on
whether the home is in a standard housing-
owner with a property valued well beyond the FHA mortgage limits, and who has a large amount of equity, will not
receive as much cash from a HECM as they might from another private or public agency. Reverse mortgage
programs are available in most states, as well as the District of Columbia and Puerto
Rico, through HUD-
lenders or organizations like Fannie Mae. However, anyone interested in a reverse mortgage is encouraged to
speak with a HUD-
10. Should my loved one use an estate planning service to find a reverse mortgage?
My loved one has been contacted by a firm that will refer him or her to a lender in exchange for a “small percentage”
of the loan.
There really is no reason for your loved one to engage such a service. HUD provides this information without cost,
and HUD-
approved lenders. More information is available at your loved one’s local HUD-
