Reverse Mortgage Q&A

A home equity conversion mortgage (HECM), more commonly known as a reverse mortgage, lets homeowners 62 years of age and older tap into the home equity they’ve grown over the years. The HECM reverse mortgage program is not a government benefit. A reverse mortgage is a loan that you’ll have to pay back according to the program terms. Your reverse mortgage monthly payout will vary based on the loan terms you choose.

  • Allows you to secure a portion of your home equity as tax-free funds*
  • Does not require monthly mortgage payments**
  • Insured by the Federal Housing Administration (FHA)***
  • Can also be used to buy a new home using equity from the sale of your previous home

*Always consult a financial advisor and an appropriate government agency for guidance on how taxes or government benefits may be affected. **Requires you to live in the home as your primary residence, pay property taxes and homeowners insurance, and maintain the home according to FHA’s guidelines. ***Cornerstone Home Lending is not affiliated with the U.S. government, nor has this information been approved by a government housing agency.

  • You must live in your home as your primary residence
  • You need to be paid up on property taxes and homeowner’s insurance
  • You have to keep up with your home maintenance
  • At least one borrower on the reverse mortgage loan must be 62 or older
  • You must meet HUD’s financial eligibility guidelines
HECM borrowers are also required to receive counseling from an HUD-approved counseling agency. The National Council on Aging recommends that borrowers talk with an HUD counselor before meeting with a lender for objective information.
  • Live in your home and keep the title for it.
  • Use the funds from a reverse mortgage to pay off your existing mortgage.
  • You’re no longer required to pay monthly principal and interest payments on a reverse mortgage – but you’re still required to pay for real estate taxes, homeowners insurance, and home maintenance.
  • You may not have to pay taxes on your monthly payout. Reverse mortgage proceeds are typically not considered taxable income – check with a tax advisor for guidance.
  • Because a reverse mortgage is a non-recourse loan, you and your heirs are not personally liable for any amount of the mortgage that surpasses your home’s value.
  • After the reverse mortgage is repaid, you or your heirs get to keep any remaining equity.

No! Depending on your personal financial situation, the possibilities could be endless. You could use funds from a reverse mortgage to:

  • Supplement income
  • Cover healthcare or emergency expenses
  • Pay for home renovations
  • Pay off high-interest debt
  • Buy a new home

Depending on whether your HECM is fixed-rate or adjustable, you could receive your funds as:

  • A lump sum. You’ll get the entire loan proceeds upfront.
  • A line of credit. You’ll draw on your loan when and for how much you choose.
  • A monthly tenure.. You’ll get a monthly payout from your lender for as long as you live in the home.
  • A monthly term.. Similar to the tenure option, you’ll get a monthly payout for a set number of years that you choose; generally, a term payout is larger than a tenure.
  • A combination.. You’ll combine a line of credit with either a monthly tenure or a monthly term.

Mortgages aren’t one-size-fits-all – and that’s especially true for a reverse mortgage. Speaking with an HUD counselor and reputable reverse mortgage lender like Steve Scheiern can help you to feel confident in your decision.

  • Your loan fees might be higher than those on a traditional mortgage.
  • Medicaid, Social Security, Medicare, and other government benefits programs could be affected.
  • You might leave fewer assets and equity to your heirs. A home with a reverse mortgage may be left to your heirs, but the reverse mortgage loan balance must be paid back.
Do you have more questions? Call Steven today!