What Exactly is a Reverse Mortgage Loan?
A reverse mortgage is a loan that enables homeowners and home buyers age 62 or older to convert some of their home equity into cash or a line of credit. Some loans also let homeowners finance a new home purchase. With a reverse mortgage, you make no loan payments. You continue to live in and own your home.
Unlike a traditional home equity loan or home equity line of credit (HELOC), you don't have to repay a reverse mortgage until the home is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home. The homeowners must maintain the condition of the home and stay current with property taxes and hazard insurance.
Eligibility Criteria for Reverse Mortgage Loan Application
To be eligible for a reverse mortgage, you must meet the following criteria:
- You must be age 62 or older
- The home must be the borrowers' primary residence
- The home must meet Federal Housing Authority (FHA) minimum property standards and flood requirements
The home must be one of the following property types:
- Single-family home
- Two to Four unit home with one unit occupied by the borrower
- HUD approved condominium
- If you have a new construction, you must have a Certificate of Occupancy or equivalent before you apply
You must have sufficient home equity. A reverse Mortgage Specialist from Verger Mortgage can tell you if you have enough home equity to qualify.
Commonly Asked Questions About Reverse Mortgage Loans
Will the bank own my home?
No. Just like a traditional mortgage, as long as you continue to meet the loan terms, such as staying current on property taxes, homeowners insurance, and property changes, you retain full ownership. You can sell the home at any time.
How much money will I get with a reverse mortgage loan?
You will receive a portion of your home equity. How much depends on a number of factors including:
- The age of the youngest borrower or non-borrowing spouse
- Your home's value
- Equity amount
- FHA lending limits
- Current interest rate
- Reverse mortgage product
- Choice of payment option
A Reverse Mortgage Specialist at Verger Mortgage can provide you with a FREE quote that's tailored to your specific situation.
Up-front costs may include:
- A property appraisal fee
- An origination fee
- Closing costs
- A mortgage insurance premium
- A modest HECM counseling charge (if applicable)
- A servicing fee
You can roll most of the up-front costs into your loan to minimize out-of-pocket expenses. While closing costs may vary based on the type and size of the loan they are similar to those for any traditional mortgage.