What is a reverse mortgage and how does a reverse mortgage work?

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Designed for seniors, a reverse mortgage is a loan that allows the homeowner to convert some of the equity in their home into cash or monthly income, while retaining home ownership. A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM) is a relatively new product. A reverse mortgage provides unique benefits for its target market eg: someone over 62 who lives in his/her primary residence, who has substantial equity in his/her home, and who has little or no income. A reverse mortgage is a loan against the equity in your home that you don't need to pay back for as long as you live in the home. Eligibility for a reverse mortgage is set by the Federal Government; The Federal Housing Authority FHA tells HECM lenders how much they can lend you, based on your age and your home's value.


The mortgagor is not required to make any payments, the home is owned by the bank upon the death of the mortgagor and the transaction is structured so that the loan amount will not exceed the value of the home at that time. That feature should raise a red flag. That means the homeowner isn't given the fair market value of the property initially because the bank must figure in the interest over the possible life of the loan.

Good credit is not relevant because the home provides the security for the loan. In some cases the heirs have the option to pay off the mortgage when the owner dies but the cost can be extremely high. This type of mortgage has higher up front fees than conventional mortgages and those costs become part of the original mortgage which accrues interest at a rapid rate. This is an important factor to consider because the mortgage must be paid in full if the owner decides to sell the property or if their heirs desire to keep it after their death. Especially troublesome is the fact that many reverse mortgage lenders will send a loan officer to the senior's home to sign the loan documents and the senior has no benefit of having another pair of eyes and ears present at the transaction.
To be eligible for a reverse mortgage, you need to be at least 62 years old, occupy the home as a primary residence, and either own your own home outright or only owe a small amount on your existing mortgage loan that can be paid off at closing with the proceeds from the reverse mortgage.

In general, a reverse mortgage is tax free and has no income restrictions. Additionally, most payments from a reverse mortgage won't affect Social Security or Medicare benefits. In fact, many seniors use a reverse mortgage to supplement their Social Security and Medicare, allowing for more financial security.

Reverse mortgages also work in a purchase transaction. You can purchase a home without making a single monthly mortgage payment. This option allows seniors to move close to family when the need arises. There are various ways seniors can benefit with a reverse mortgage including receiving additional tax-free monthly income or a lump sum payment, cancelling a current mortgage payment, funding long term care insurance and in-home care, renovations and repair work to their homes.

In many states, the Reverse Mortgage, or Senior Reverse Mortgage, allows for a new home purchase with the use of reverse mortgage funds, this rule does not apply nationwide. Although HUD and the FHA recently passed the HECM Reverse Mortgage home purchase program, allowing you to purchase a new home with reverse mortgage proceeds, borrowers in Texas are not yet eligible. Rules in individual states may vary. Please see a specialist in your own state for more details.
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What is reverse mortgage and how does it work?

A reverse mortgage, also known as a Home Equity Conversion Mortgage(HECM) is a relatively new product. A reverse mortgage providesunique benefits for its target market: someone over 62 who lives inhis/her primary residence, who has substantial equity in his/herhome, and who has little or no income. ( Full Answer )

Are reverse mortgages risky?

Reverse mortgages do not carry the same risks as conventional mortgages. Since repayment of the loan is not made until the borrower is no longer living in the home, there are no worries about fees associated with late payments, or possibly losing the house due to foreclosure. However, the interes ( Full Answer )

How do you do a reverse mortgage purchase?

A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM) is a relatively new product. A reverse mortgage provides unique benefits for its target market: someone over 62 who lives in his/her primary residence, who has substantial equity in his/her home, and who has little or no inco ( Full Answer )

How does a reverse mortgage purchase work?

Similar to a purchase with a regular mortgage. The difference is that you need a large enough down payment to qualify, and you won't ever have to make a mortgage payment on the new home.

What is reversed mortgage?

Reverse Mortgage is a type of mortgage here in Canada where aninstitution can loan you the money on your paid off house upto acertain amount (usually 50%)of the price of your house and pay youa set amount per month or lump sum depending on what you choose.This type is usually available to people who ( Full Answer )

Do you have to pay on reverse mortgage loans?

You will not have to repay the loan for the entire time that you live in that home. You retain complete ownership of your home and after you're gone, your heirs can refinance the loan into a traditional mortgage, sell the home, or walk away from the home altogether. Simply put, a reverse mortgage ( Full Answer )

How small of a mortgage do you need for reverse mortgage?

This is the WRONG place to get this kind of info. You need to speak with a trusted mortgage specialist because reverse mortgages makes you initial payment a lot higher and it has lots of risk along with that. Be careful, good luck, God Bless. To my knowledge, there is is not a minimum amount. The a ( Full Answer )

Can a reverse mortgage be reversed?

From Talk Refinance: You do not have to repay this loan in your lifetime. Once your home is sold should you pass away the repayment will be taken from the proceeds of your home. Repayment also occurs if you decide to sell your home, or move out of your home. . http://www.talkrefinance.com HUD say ( Full Answer )

Can you get mortgage insurance on a reverse mortgage?

Insurance is already part of the reverse mortgage program paid to the FHA to insure your loan. The HECM standard products require 2% of the loan amount / lending limit financed where the new "saver" program requires just 0.1%. Both standard and saver programs have an additional 1.250% insurance whic ( Full Answer )

How does the mortgage balance get paid when you get a reverse mortgage?

Senior homeowners in US who have a lot of equity in their homes can qualify for these loans. Rather than making monthly mortgage payments to the lender, the homeowners can use the equity in their home to receive monthly payments from the lender. The borrower does not have the responsibility of payin ( Full Answer )

How can you get out of a reverse mortgage?

You can refinance out of a reverse mortgage at any time, there is no prepayment penalty. you can also sell whenever you want and move. Any equity remaining will be yours to keep. If there is negative equity in the home you can turn it over to the lender and will not face personal recourse against yo ( Full Answer )

How does a reverse mortgage work when you die?

The lender gets the property when you die. If your heirs want tokeep the property then they must pay off the reverse mortgagewithin a certain time period after your death. However, the costsare often very high. The lender should be notified of the death ofthe owner. If the heirs cannot pay the lende ( Full Answer )

You want to get out of reverse mortgage and into conventional mortgage?

You can always get out of a reverse mortgage by refinancing it to a conventional mortgage, but before you do make sure its what you really want. A reverse mortgage is far better than most people realize. Not only do they not require payments and allow you to stay in the home as long as you live ther ( Full Answer )

Why are there 2 notes and mortgages in a reverse mortgage?

The first note belongs to the mortgage lender and the second to HUD. By doing this, other loan companies are prevented from attaching a 2nd lien to the home, because the secondary lien position is occupied by HUD. Visit the related link for more reverse mortgage information.

What happens to a reverse mortgage in bankruptcy?

A reverse mortgage is typically unaffected by bankruptcy. Only in a case where you want to surrender the home would the bankruptcy court be involved on any mortgage product other than to dictate terms of repayment of defaulted payments. with a reverse mortgage there are no payments so that would not ( Full Answer )

Who offers reverse mortgages?

You can get a reverse mortgage from several places. There are both brokers and bankers in the business. Financial Freedom and Bank of America has exited the reverse mortgage market, however others are still going strong. a simple Google search will pull several up. Just make sure to shop it as you w ( Full Answer )

How is a reverse mortgage paid off?

A reverse mortgage can be paid off either by selling the home and using sales proceeds, refinancing the home, or doing a streamline reverse mortgage to a new reverse mortgage program. If the homeowner wishes to move, they can sell and use a reverse mortgage to purchase a new home. If the homeowner ( Full Answer )

Should reverse mortgages have mortgage insuranc?

In the perfect world no mortgage insurance would be necessary, however nearly all reverse mortgages today are backed by FHA's HECM reverse mortgage program which requires mortgage insurance. I key difference however with reverse mortgages is that there is no personal guarantee or recourse against t ( Full Answer )

What does mean mortgage payment reversal?

this site is bogus. its adds all lead to the same bank abusing your mortgage. they want your thoughts so they know how to scam . take a look around it promotes banks and they same banks causing the problem signed fed up

What is a reverse mortgage and how does it work?

In short, a reverse mortgage is a mortgage that does not require any mortgage payments to be made, and the funds received from the loan can be received via a lump sum of money, an equity line of credit, or monthly payments made to you from the lender. Most of these mortgages are backed by FHA's HECM ( Full Answer )

Can you do a reverse mortgage on a townhome?

You can, if the town home is in an approved FHA complex it makes it much easier. If it is not then you have to apply for a spot approval which is asking for an exception to the requirement that the HOA or complex be FHA approved based on the merits of your particular property.

Does a reverse mortgage work for a government loan?

To get a reverse mortgage, ALL of the following must be true: * The borrower is 62 years old or older * The borrower owns their home outright - No mortgages associated with the property - No home equity loans associated with the property - No home equity lines of credit associated with the p ( Full Answer )

Is reverse mortgage taxable?

lots of info on my site on this one, but in short the money you get from the reverse mortgage is not subject to income tax because it is borrowed money, not earned money. this is similar to a home equity line of credit taken out against a home, no income tax is paid on the loan. On the flip side, t ( Full Answer )

What are pros and cons of reverse mortgage?

I know that it is a way for people who have built equity in their home when it is paid off to get money for living expenses etc. Like for elderly people with medical bills etc. If they have no other income and need the money. It is like taking out another mortgage again, because then the home isn't ( Full Answer )

Why are there two mortgages in a reverse?

It's only one mortgage loan but because they are Federally-Insured HUD has a 2nd trust deed on the property to insure that in the event the loan servicer or bank should fail the Federal Housing Administration can continue guaranteeing the borrowers payments on the loan and transfer the servicing to ( Full Answer )

Is a reverse mortgage a wise move?

It's like so many other things - it is a truly wise and sensible move for some people under certain circumstances. It would be a very bad move for others. Talk to an official at your local bank - they will have all the information you want on Reverse Mortgages.

How do you apply for a reverse mortgage extension?

some clarification would be helpful on what you are asking, however a reverse mortgage is never due as long as you live in the home. Once the borrower passes away the heirs will have 6 months to refinance or sell the home. if this time passes and the home is not sold or refinanced then an extension ( Full Answer )

Do you have a mortgage from AARP Reverse Mortgage?

No I do not have a mortgage from AARP Reverse Mortgage because I am not 100 years old. That is for old people who need money and do not need their house any longer because they will be dieing soon.

What is the difference between mortgage and reverse mortgage?

In a regular mortgage the person is making payments o the mortgage holder in order to build equity in their home. In the case of a reverse mortgage, the bank is making payments to the person against the equity that is in the home. A reverse mortgage allows you to draw on the equity of your home wi ( Full Answer )

Where can you find a reverse mortgage calculator?

Reverse mortgage calculators can be found on line on most mortgage websites.There are hundreds of mortgage loan sites.& This calculator makes it easier to understand the reverse mortgage math and to let you see if this type of mortgage is best for you.

What reverse mortgage calculator is best?

A reverse mortgage is a nice financial instrument for the senior citizens in the country who do not have adequate retirement fund at their disposal and whose age is 62 or more. If you are curious about how much money you could qualify in a reverse mortgage feel free to check out our Reverse Mortgage ( Full Answer )

What do you do if you inherit a reverse mortgage?

If you inherit property that is subject to a reverse mortgage you must make arrangements with the bank to pay off the mortgage if you want to keep the property. If not then the bank will take possession of the property under the terms of the reverse mortgage. If you inherit property that is subject ( Full Answer )

What is a reverse mortgage lead?

A reverse mortgage lead is where you can get names of people that are interested in getting a reverse mortgage. These leads should already have been screened to meet the criteria for a reverse mortgage.

What exactly are reverse mortgage leads?

"Reverse mortgage leads are people who need to refinance their mortgages. Companies get this information, and then sell these peoples numbers to banks that do mortgages."

What do you think about a reverse mortgage?

A reverse mortgage is an arrangement whereby an elderly homeowner can borrow money against the value of their home if the home is free of any other liens. The mortgagor is not required to make any payments, the home is owned by the bank upon the death of the mortgagor and the transaction is structur ( Full Answer )

Is a reverse mortgage a good thing?

Reverse mortgages can definitely be a 'good thing' however it really depends on your personal situation. Many seniors find it beneficial to explore reverse mortgages if they are having trouble keeping up with bills or heath care expenses. A Reverse mortgage can help but allowing you to draw from the ( Full Answer )

Does a spouse have to sign for a reverse mortgage?

At the moment there are very few investors willing to purchase reverse mortgage loans with a non-borrowing spouse due to the AARP / HUD lawsuit. It's advised that both you and your spouse go on the loan together as the reverse mortgage becomes a balloon payment when the last surviving borrower passe ( Full Answer )

How do you qualify for a reverse mortgage?

To qualify for a reverse mortgage, the borrower must be at least 62 years old, own their home in full (or be able to pay the balance on their home with the proceeds of the reverse mortgage), and live in that home as their primary residence.

How does a reverse mortgage calculator work?

A reverse mortgage is a program for seniors backed by the Federal Housing Administration that enables them to access the equity of their home without repayment. The mortgage calculator works by comparing loans. This program provides seniors with added security by acting as financial supplement for s ( Full Answer )

Who can qualify for a reverse mortgage?

Applicants for a reverse mortgage must be 62 years of age and a home owner. The home cannot be a trailer or cooperative house, and it must meet the U.S. Department of Housing and Urban Development standards.

What is a reverse mortgage for?

A reverse mortgage is for helping older people who might need money. A reverse mortgage is a type of loan for people over the age of 62 who are home owners and they can use this loan to pay for unexpected expenses.

What is the definition of a reverse mortgage?

The meaning of reverse mortgage (lifetime mortgage) is when a senior citizen who owns a home wants to convert the equity in their home to monthly income or some sort of line or credit.

What is reverse mortgage and how can you get it?

Reverse mortgage is a loan given to homeowners aged 62 years andabove to help them convert part of the equity in their home intocash and you can get it only if you own a home.