Reverse Mortgage Frequently Asked Questions
With James Stanko, Home Equity Conversion Mortgage (HECM) Loan Specialist, NMLS # 1044434, Reverse Mortgage Funding LLC (RMF)
For more information on Reverse Mortgage, please fill out our reverse mortgage inquiry form.
Q: What is a reverse mortgage?
A: A reverse mortgage is a home-secured loan that’s exclusively for homeowners and homebuyers age 62 and older. It allows borrowers to convert some of the equity in their home into income-tax-free funds. (Not tax advice, consult a tax professional.) There are different loan products to choose from that offer you options on what interest rate you are charged, how much money you can access, and how you receive your payments. Unlike a regular “forward” mortgage or traditional home equity loan or home equity line of credit, there are no monthly principal and interest payments as long as at least one of the borrowers lives in the home as their primary residence. As with any mortgage, in order for the loan to remain in good standing the borrower must also keep up with property-related taxes, insurance and upkeep.
Q: What is a Home Equity Conversion Mortgage (HECM)?
A: A HECM is a reverse mortgage loan that’s insured by the Federal Housing Administration (FHA).
Q: What is the age requirement for a reverse mortgage purchase or reverse mortgage refinance?
A: In August of 2014 HUD eased the eligibility requirements for a Reverse Mortgage. Only one spouse or domestic partner now has to be over the age of 62. The remaining partner can be as young as 18 years of age. The funds available from the Home Equity Conversion Mortgage will be determined by the age of the youngest.
Q: What is the required downpayment to purchase a home with a reverse mortgage?
A: The amount of money required is dependent upon 1) Age of the youngest borrower; 2) Appraised value or $625,500 (whichever is less) of the home; 3) Current level of interest rates. In general, a good estimate, is an applicant will need between 45% to 55% down.
For example, with a cash downpayment of $281,250 to $343,750, you could purchase a home priced up to $625,000.
Q: Is the downpayment requirement for reverse mortgage purchase or reverse mortgage refinance lower for older borrowers? Please provide examples of down payment percentages depending on age.
A: Yes, the older the age of the youngest borrower the less the down payment required. See attached flyer I prepared for Auberge as examples.
Q: What is the required home equity to refinance a home with a reverse mortgage?
A: At age 62 the HECM will provide a gross amount of approximately .524% of the home’s appraised value of homes up to $625,500. That percentage increases gradually to the maximum 75% at age 90. From the gross amount fees for FHA insurance, Lender fees, and normal closing costs and any other liens on the property have to be paid.
Q: What type of properties are eligible for a reverse mortgage purchase?
A: Single-family homes (one to four-unit properties)
Manufactured homes (built after June 1976)
Condominiums—Must be FHA approved
Properties in planned unit developments (PUDs)
Townhouses, and properties held in a living trust
Newly constructed properties are eligible only if local authorities have issued a Certificate of Occupancy or its equivalent.
Note: The borrower must occupy the property securing a HECM loan within 60 days.
Q: Are new homes (for example Auberge at Del Sur) eligible for a reverse mortgage?
A: Yes, new homes, are definitely eligible for a reverse mortgage. However, property must have Certificate of Occupancy before closing can occur.
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