Reverse Mortgage Programs / Resources.
What Is A Reverse Mortgage And How Does It Work?
A reverse mortgage is a financing option that allows eligible homeowners age 62 or older to access a portion of the equity they have built in their primary residence. Unlike a traditional mortgage, borrowers generally do not make monthly mortgage payments toward principal and interest while they continue to meet the loan requirements.
The amount available may depend on factors such as the borrower’s age, the home’s value, the existing mortgage balance, and the applicable reverse mortgage program. The homeowner remains responsible for property charges such as property taxes, homeowners insurance, and maintaining the home according to program requirements.
What Are The Basics?
- Generally available to eligible homeowners age 62 or older
- The home must generally be the borrower’s principal residence
- The homeowner retains ownership of the property
- Existing liens and mortgage balances generally must be satisfied at closing
- Borrowers remain responsible for property taxes, homeowners insurance, and property maintenance
- The amount available is based on program-specific eligibility and financial factors
- The loan becomes due when the borrower no longer meets the occupancy or other applicable requirements, subject to program terms
- Counseling may be required for certain reverse mortgage programs
There are several types of reverse mortgage solutions, and eligibility, costs, loan limits, and available proceeds can vary by program. Understanding these differences is an important step before deciding whether a reverse mortgage is appropriate for your situation.
Reverse Mortgage Program Options
Home Equity Conversion Mortgage (HECM)
The HECM is the most widely recognized federally insured reverse mortgage program. Eligible homeowners may be able to convert a portion of their home equity into loan proceeds while continuing to live in the property as their principal residence.
Depending on the program and borrower circumstances, proceeds may be available through different payment structures.
HECM For Purchase
A HECM for Purchase may allow an eligible senior to purchase a new principal residence using reverse mortgage financing. This can combine the home purchase and reverse mortgage financing into one transaction, subject to FHA and HECM requirements.
Proprietary Reverse Mortgage Programs
Proprietary reverse mortgages are private reverse mortgage products that are not insured by the Federal Housing Administration. Depending on the lender and borrower qualifications, these programs may offer alternatives for homeowners whose needs do not fit within standard HECM parameters.
Program availability, property requirements, loan amounts, and other terms can vary.
Reverse Mortgage Eligibility Considerations
Before applying for a reverse mortgage, homeowners should understand the basic requirements that may apply.
Borrower Requirements
Eligibility can depend on factors including:
- Age of the borrower
- Primary residence status
- Financial obligations
- Existing mortgage balance
- Ability to meet ongoing property-related obligations
- Program-specific requirements
Property Requirements
The property must generally meet applicable program and lender requirements. Depending on the reverse mortgage program, eligible property types may include certain single-family homes, eligible condominium units, and qualifying 2-to-4-unit properties where the borrower occupies one unit as the principal residence.
Some property types may not qualify, so property eligibility should be confirmed before moving forward.
Understanding Reverse Mortgage Proceeds
Reverse mortgage proceeds may be structured in different ways depending on the selected program. Potential options can include:
- Lump-sum proceeds
- Monthly payments
- A line of credit
- A combination of available options
The amount a homeowner may receive is determined by program guidelines and individual circumstances. Homeowners should review how the selected payment structure could affect their available equity and long-term financial plans.
Important Borrower Responsibilities
A reverse mortgage does not eliminate the homeowner’s responsibility for maintaining the property and meeting certain ongoing obligations.
Borrowers generally must:
- Continue living in the property as their principal residence
- Pay property taxes when due
- Maintain appropriate homeowners insurance
- Keep the property in suitable condition
- Follow the requirements of the applicable reverse mortgage program
- Meet any other obligations stated in the loan documents
Failure to meet these obligations may have consequences under the terms of the reverse mortgage.
Reverse Mortgage Costs And Fees
Reverse mortgage transactions may involve several costs. Depending on the program, these may include:
- Origination charges
- Mortgage insurance premiums for applicable FHA-insured programs
- Appraisal costs
- Title and settlement charges
- Recording fees
- Counseling fees, where applicable
- Other third-party or lender charges
Some eligible costs may be financed through the reverse mortgage rather than paid entirely out of pocket at closing. Specific costs depend on the loan program and individual transaction.
Reverse Mortgage Counseling
For applicable HECM transactions, borrowers are generally required to complete counseling with an approved independent housing counseling agency before obtaining the loan.
Counseling is designed to help homeowners understand:
- How a reverse mortgage works
- Available alternatives
- Financial responsibilities
- Loan costs and repayment requirements
- How the loan may affect the homeowner and heirs
- Important conditions that could cause the loan to become due
Independent counseling can provide homeowners with additional information before making a financing decision.
Common Questions About Reverse Mortgages
Do I Still Own My Home?
Yes. A reverse mortgage generally allows the homeowner to retain ownership of the property. However, the borrower must continue meeting the obligations associated with the loan, including applicable property charges and occupancy requirements.
Do I Have To Make Monthly Mortgage Payments?
Reverse mortgage borrowers generally do not make monthly mortgage payments toward principal and interest, provided they meet the requirements of the loan. However, borrowers remain responsible for property taxes, homeowners insurance, maintenance, and other required expenses.
Can I Use Reverse Mortgage Proceeds For Any Purpose?
Generally, reverse mortgage proceeds can be used for many personal financial purposes. However, homeowners should consider their overall financial situation and understand how using home equity may affect future borrowing capacity and the equity remaining in the property.
What Happens When The Homeowner Moves Out?
A reverse mortgage generally becomes due when the borrower permanently moves out of the home or another event specified in the loan documents occurs. The exact requirements depend on the loan program and circumstances.
What Happens To The Home After The Borrower Dies?
When the last surviving borrower dies, the reverse mortgage generally becomes due. Eligible heirs may have options regarding the property, subject to the loan balance, property value, program rules, and applicable requirements.
Explore Your Reverse Mortgage Options
A reverse mortgage can involve important financial considerations, and every homeowner’s situation is different. Michael S. Wayland, Jr., Senior Loan Officer with C2 Financial Corporation, can help you understand available reverse mortgage programs, review general eligibility requirements, and explain the process.
Michael S. Wayland, Jr.
Senior Loan Officer
C2 Financial Corporation
NMLS #1835735 | Company NMLS #135622
12230 El Camino Real, Suite 100, San Diego, CA 92130
Phone: (614) 906-4355
Email: mwayland@c2financial.com