Manifest Mortgage Group
Reverse Mortgage Loans
Manifest Mortgage Group
Reverse Mortgage Loans
Turn Your Home Equity into Financial Flexibility
For homeowners age 62 and older, the equity built in a home can represent an important financial resource. A reverse mortgage may allow eligible homeowners to access a portion of that equity while continuing to live in their home.
Unlike a traditional mortgage, a reverse mortgage generally does not require monthly mortgage payments. Instead, repayment typically occurs when the home is sold, the borrower permanently moves out, or the last surviving borrower passes away, subject to the terms and requirements of the loan.
At Manifest Mortgage Group, we understand that financial decisions later in life deserve careful consideration. Our goal is to help you understand how a reverse mortgage works, what you may qualify for, and whether this type of financing may fit your individual financial goals.
You remain responsible for property taxes, homeowners’ insurance, maintenance, and other applicable loan requirements.
GOALS what is a reverse mortgage loan?
A reverse mortgage is a type of home loan designed primarily for homeowners age 62 and older. It allows eligible homeowners to convert a portion of their home equity into funds without selling their home or giving up ownership.
The most common type of reverse mortgage is a Home Equity Conversion Mortgage, or HECM. HECM loans are insured by the Federal Housing Administration and have specific eligibility and counseling requirements.
With a reverse mortgage, eligible homeowners may be able to:
- Access a portion of their home equity as cash
- Remain in their home while accessing available equity
- Receive funds through available payment options
- Avoid required monthly mortgage payments*
- Use the funds for a variety of financial needs, subject to the terms of the loan
The amount available through a reverse mortgage depends on several factors, including the homeowner’s age, home value, current interest rates, existing mortgage balance, and the specific reverse mortgage program.
A reverse mortgage can provide financial flexibility, but it is important to understand how the loan works before making a decision.
You are still responsible for property taxes, homeowners’ insurance, home maintenance and other applicable loan obligations.
Getting Started Is Straightforward
If you’re considering a reverse mortgage, understanding the basic qualification requirements is an important first step.
Generally, homeowners considering an FHA-insured HECM must:
- Be 62 years of age or older
- Own the home outright or have sufficient equity
- Live in the home as their principal residence
- Meet applicable financial eligibility requirements
- Keep current on property taxes and homeowners’ insurance
- Maintain the home according to applicable requirements
- Complete required reverse mortgage counseling
If you currently have a traditional mortgage on your home, you may still be able to qualify for a reverse mortgage. However, the existing mortgage generally must be paid off when the reverse mortgage closes. In most cases, the reverse mortgage proceeds may be used to pay off the existing mortgage.
Every homeowner’s financial situation is different, which is why reviewing your individual circumstances is an important part of the process.
How Reverse Mortgage Payments Work
One of the biggest differences between a reverse mortgage and a traditional mortgage is how the loan funds are distributed.
With a traditional mortgage, you typically borrow money to purchase or refinance a home and then make monthly payments to the lender. With a reverse mortgage, eligible homeowners may be able to access a portion of their existing home equity without making required monthly mortgage payments.
Depending on the reverse mortgage program, homeowners may have different ways to receive available funds. Your options and the amount you may qualify for will depend on your specific circumstances and the loan program.
As funds are received, interest and applicable fees are generally added to the loan balance. Because you are not making required monthly mortgage payments, the balance may increase over time.
Repayment generally occurs when the home is sold, the borrower permanently moves out of the home, or the last surviving borrower dies. Certain other circumstances may also cause the loan to become due.
Understanding this repayment structure is an important part of determining whether a reverse mortgage is right for you.
Pros and Cons
Every major financial decision should be informed. Understanding both the potential benefits and drawbacks can help you determine whether a reverse mortgage makes sense for your situation.
Potential Benefits of a Reverse Mortgage
Stay in Your Home and Keep Ownership
A reverse mortgage does not mean you automatically give up ownership of your home. The title generally remains in your name as long as you continue meeting the requirements of the loan.
Access Your Home Equity
A reverse mortgage can give eligible homeowners access to a portion of the equity they have built in their home. This may provide additional financial flexibility during retirement.
No Required Monthly Mortgage Payment
One of the most attractive features of a reverse mortgage is that eligible borrowers generally do not have required monthly mortgage payments. However, interest and applicable fees continue to accrue and are added to the loan balance.
Non-Recourse Protection
Certain reverse mortgage programs include non-recourse protections, meaning the borrower or estate generally will not owe more than the value of the home when the loan becomes due, subject to the terms and requirements of the program.
Potential Considerations of a Reverse Mortgage
Fees and Closing Costs
Reverse mortgages can involve costs such as origination fees, closing costs and mortgage insurance premiums. Understanding these costs before proceeding is important.
The Loan Balance Can Increase
Because required monthly mortgage payments generally aren’t made, interest and applicable fees can be added to the loan balance over time. This means the amount owed may increase.
You Still Have Financial Responsibilities
A reverse mortgage does not eliminate your responsibility for property taxes, homeowners’ insurance, home maintenance and other applicable expenses. Failing to meet these responsibilities could result in the loan becoming due.
Your Heirs May Need to Address the Loan
When a reverse mortgage becomes due following the death of the borrower, the borrower’s heirs generally have options for handling the loan. These may include selling the home or paying off the loan to keep the property, depending on the circumstances and loan requirements.
Is a reverse mortgage right for you?
A reverse mortgage isn’t the right solution for every homeowner. Your financial goals, home value, existing mortgage balance, plans for your home, and long-term financial needs should all be considered.
For some homeowners, accessing home equity may provide valuable financial flexibility. For others, a traditional refinance, home equity loan, HELOC or another financial strategy may be more appropriate.
That’s why understanding all of your options is so important.
A reverse mortgage can be a significant financial decision, and homeowners should take time to understand the costs, requirements, repayment process and potential impact on their estate.
At Manifest Mortgage Group, we believe borrowers should feel informed and confident before making a mortgage decision. Our team takes a personalized approach to helping homeowners understand their financing options and determine what may best fit their individual needs.
What are the borrower qualifications for a reverse mortgage?
For a federally insured Home Equity Conversion Mortgage (HECM), borrowers generally must be at least 62 years old. Some proprietary reverse mortgage programs may be available to homeowners as young as 55, depending on the loan program and state. You will also generally need significant equity in your home, live in the property as your primary residence, and complete a financial assessment to demonstrate that you can meet your ongoing loan obligations. Additional requirements may apply. Contact Manifest Mortgage Group to discuss your specific situation and available options.
What happens to my existing mortgage?
If you have an existing mortgage, it must be paid off as part of obtaining a reverse mortgage because the reverse mortgage must be in the first lien position. In many cases, the existing mortgage is paid off using proceeds from the reverse mortgage. Once the existing mortgage is paid off, you will no longer have the required monthly mortgage payment associated with that loan.
However, a reverse mortgage does not eliminate all financial obligations associated with owning your home. You must continue to live in the property as your primary residence and remain responsible for property taxes, homeowners insurance, applicable fees, and maintaining the home. If you do not meet these obligations, the reverse mortgage may become due and payable.
What kind of fees are involved?
Reverse mortgage costs can include loan origination fees, closing costs, mortgage insurance premiums for certain federally insured HECM loans, and required counseling costs. The specific fees will depend on the type of reverse mortgage you choose and your individual loan.
One benefit of a reverse mortgage is that many of the costs may be financed and added to the loan balance rather than paid entirely out of pocket at closing. Your Manifest Mortgage Group loan professional can explain the costs associated with your available reverse mortgage options before you move forward.
What happens at the end of a reverse mortgage?
A reverse mortgage generally becomes due when the last borrower passes away, sells the home, or no longer lives in the home as their primary residence, subject to the terms of the loan and any protections that may apply to an eligible non-borrowing spouse.
When the loan becomes due, the outstanding principal balance, accrued interest, and applicable fees must be repaid. Borrowers or their heirs may generally repay the loan by selling the home or using other available funds. If the home is worth less than the amount owed, the non-recourse features of an eligible reverse mortgage may protect the borrower or heirs from being personally responsible for the difference, subject to the specific loan terms.
Will my heirs get stuck with the debt?
Generally, no. Federally insured reverse mortgages are non-recourse loans, which means the borrower or heirs generally will not be personally responsible for a loan balance that exceeds the value of the home. If the reverse mortgage balance is greater than the home’s value when the loan becomes due, the lender’s ability to collect is generally limited to the property, subject to the terms and requirements of the loan.
Heirs may have the option to keep the home by satisfying the loan according to the applicable requirements, or they can choose to sell the property to repay the reverse mortgage. Any remaining equity after the loan is satisfied may go to the heirs or estate.