What Is A Reverse Mortgage?

Deciding whether a reverse mortgage loan is right for you often requires education and expert advice. We hope the following information is beneficial as you explore whether a reverse mortgage loan is right for you.

Types of Reverse Mortgage Loans

When considering a reverse mortgage, it’s essential to understand the three main types available. Each serves different needs and offers unique advantages:

• Home Equity Conversion Mortgages (HECM): These federally insured loans are the most popular choice for homeowners aged 62 and older. HECM loans offer flexibility and can be used for a variety of purposes, from covering daily expenses to funding major home improvement projects.
• Proprietary Reverse Mortgages: Often referred to as “jumbo” reverse mortgages, these are specifically designed for homes with higher values. They are not federally insured but can provide larger loan amounts, making them popular in areas with expensive real estate.
• Single-Purpose Reverse Mortgages: These are less common but may be a cost-effective option if you need help covering specific expenses, such as home repairs or property taxes. While availability is limited, they can be a practical solution for targeted needs.
  Understanding these types can help you decide which option best aligns with your financial goals and circumstances.

Qualifications for Reverse Mortgage Loans
To qualify for a reverse mortgage loan there are some basic requirements, such as:

• At least one borrower (that will be on title) must be at least 62 years old.
• The home must be maintained as the primary residence of the borrower(s) for at least 6 months out of every year.
• There must be sufficient equity in the home. While there is no specific amount of equity required - as a general rule of thumb - you'd want at least 50% equity in your home since you will need to pay off your existing mortgage with the loan proceeds. The more equity you have the more loan proceeds you will have access to.
• A HECM’s (Home Equity Conversion Mortgage) underwriting standards are unique when compared to traditional mortgage loans. All applicants are subject to a financial assessment to determine their financial capacity and willingness to adhere to the loan obligations, such as paying taxes and insurance.

Keep in mind that each lender may have different qualification requirements based on multiple factors; like your financial situation, age, interest rates, home value, and other factors. Also, you do not need to pay off your home to apply for a reverse mortgage loan.

The cash you can potentially receive is based on the age of the youngest borrower, the current expected interest rate, the mortgage option selected, and the appraised value of the home. For instance, an older individual with a higher value home typically will be eligible for more than a younger person with the same home value at the same expected interest rate. How much money you can take in the first year is limited. For more information on distribution limits, visit our reverse mortgage loan FAQs page.