Reverse mortgages are governed by the Home Equity Conversion Mortgage program of the Federal Housing Administration. The FHA sets guidelines and rules that determine who qualifies and what homes are eligible for, as well as the terms of those loans. The HECM program can help some senior homeowners enjoy their retirement years with less financial stress.
Mortgages How inverted work
A reverse mortgage loan allows you to take equity money into your home without having to pay back with the regular payments that a home equity loan would require. The loan is paid back when your house is sold, or at a point in time when you are no longer living there. The house is not part of your estate and you cannot leave it to the heirs – you are actually giving it to the mortgage companies in Texas at a later date when you will not need it anymore, such as after your death or if you move into an assisted living center.
Meanwhile, the money is yours to do what you love. You can take the product in a lump sum, in regular monthly installments for a specified period of time or indefinitely, such as a line of credit, or in a combination of these ways. There are closing costs, but you can include them in the mortgage balance – you do not have to come up with the money up front. Interest accrues over the term of the loan and expires at the time of sale. You are still responsible for paying your property taxes, insurance and the costs of maintaining your home.
Reverse mortgages are only available to homeowners 62 years of age or older. If you are married, this requirement can be met by you or your spouse. If you are disabled and collecting Social Security disability insurance, this does not change the rules – you or your spouse must always be at least 62 years old. However, the conditions of health and disability do not disqualify you either. You must actually live in the house as your principal residence, but if you and your spouse or partner take the mortgage together, it is OK if only one of you continues to reside there. You must prove that you have enough income to continue paying property taxes, maintenance and insurance.
The FHA requires landlords to sit down with an HECM advisor approved by the Department of Housing and Urban Development before signing up for a reverse mortgage. HUD – who oversees the FHA – wants to know that you are educated in all the benefits and costs of the mortgage you are about to hire.
The FHA sets the rules for your property, too. The key factor is that you must have enough equity in your home to cover the loan amount plus interest and other fees and closing costs. This usually means that you have paid your mortgage or you owe very little on the loan. If you have an existing mortgage, a portion of your product loan must go to pay it back if your reverse mortgage lender holds the primary lien on the property.
Most properties are eligible, including single-family homes and prefabricated homes built after June 1976 that meet the requirements of the FHA. Homes with two to four units are eligible as long as you live in one of the units. Condominiums are OK if approved by the HUD. Cooperatives are not eligible. Your property must be in good condition and the lender may require an inspection.