In 1989 the Department of Housing and Urban Development created the Reverse Mortgage as a “Safe and Highly-Regulated Plan” to give American Homeowners (over 62) greater financial security.
Who Qualifies for HUD Reverse Mortgages?
You must have a low or no outstanding balance on the mortgage. Loan approval is NOT based on Credit, Income or Assets. You must meet with a HUD-approved counseling agency prior to applying for the loan—to be sure you understand what the loan would mean to you.
How Does a HUD Reverse Mortgage Work?
Homeowners borrow against the equity in their homes. They receive payments in a lump sum, line of credit, tenure plan or a combination.
The loan size is based on the homeowner’s age. For example with today’s low interest rate, a 65 year-old homeowner could borrow up to 60% and a 75 year-old may borrow up to 70%.
Maximum loan size is $362,790 in most metropolitan areas and $172,632 in most rural areas.
The FHA does collect a 2% of the initial loan amount insurance premium and ½ % of the loan balance per year thereafter. The insurance covers the borrower and lender even if the property value decreases.
When Do I Repay the Loan?
The loan isn’t repaid until the borrowers move out of the home permanently, and the repayment amount can’t exceed the value of the home. The remaining equity, after payoff, is distributed to the borrower or the borrower’s heirs/estate. It is a misconception that homeowners relinquish their titles: with reverse mortgages, you still own the home!
