Getting the Right Reverse Mortgage

There are a couple types of Home Equity Conversion Mortgages (HECMs) with numerous possibilities, and SeniorClarity offers information on reverse mortgages to help you decide what is right for you.

Our Reverse Mortgage Consultants will work with you and your estate planning advisors to help you assess your individual situation and choose a reverse mortgage loan product that best meets your needs.

HECM (Home Equity Conversion Mortgage)

This type of reverse loan represents 95% of all reverse mortgages. The size of the reverse mortgage loan is determined by the homeowner's age, the current interest rate, and the value of the property up to the Federal Housing Administration's mortgage limits. HECMs feature the following:

Guaranteed by FHA/HUD
Flexible options for payments received
Growing line of credit
Maximum lending limit is $625,500

Reverse Loan Features

Although there are different types of reverse mortgages—as well as advantages and disadvantages of reverse mortgages—all of them are similar in certain ways. Here are the features that most have in common.

Homeownership: With a reverse mortgage, you remain the owner of your home just like when you had a conventional mortgage. You are still responsible for paying your property taxes and homeowners insurance. When the loan is over, you simply owe your mortgage balance, interest, any applicable fees, and nothing more. Reverse mortgage lenders don't want your house; they want repayment.
Financing Fees: You can use the money you get from a reverse mortgage loan to pay the various fees that are charged on the reverse loan. This is called "financing" the loan costs. The costs are added to your reverse loan balance, and you pay them back plus interest when the loan is over.
Loan Amounts: The amount of money you can get depends on the specific reverse mortgage program you select.
Debt Payoff: Reverse mortgages generally must be "first" mortgages, that is, they must be the primary debt against your home. So if you now owe any money on your property, you generally must either 1) pay off the old debt with the money you get from a reverse mortgage; or 2) pay off the old debt before you get areverse mortgage. Most reverse mortgage borrowers pay off any home debt with a lump sum advance from their reverse mortgage. Credit cards, car payments and other unsecured debt are not required to be paid off.
Debt Limit: The debt you owe on a reverse mortgage loan equals all the loan advances you receive (including any you used to finance the loan or to pay off prior debt), plus all the interest that is added to your loan balance. If that amount is less than what your home is worth when you pay back the reverse mortgage loan, then you (or your estate) keep whatever amount is left over. You can never owe more than what your home is worth at the time the loan is repaid. The reverse mortgage lender may not seek repayment from your income, your other assets or from your heirs. (The technical term for this cap on your debt is a "non-recourse limit." It means that the lender does not have legal recourse to anything other than your home's value when seeking repayment of the reverse mortgage loan.) This is certainly not one of the disadvantages of reverse mortgages: Many people choose reverse mortgages to relieve the burden on their heirs.

Reverse Loan Repayment

All reverse mortgage loans are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home. (Typically, a "permanent move" means that neither you nor any other co-borrower has lived in your home for one continuous year.)

Reverse mortgage lenders can also require repayment at any time if you:

Fail to pay your property taxes;
Fail to maintain and repair your home; or
Fail to keep your home insured.

These are fairly standard "conditions of default" on any mortgage. On a reverse mortgage, however, lenders generally have the option to pay for these expenses by reducing your reverse loan advances and using the difference to pay these obligations. This is only an option, however, if you have not already used up all your available loan funds.

SeniorClarity provides a reverse mortgage calculator to help you see what a reverse mortgage loan can do for you. Click here for our reverse mortgage payment calculator.

Do you want to get more reverse mortgage info? Just click here!