The government-insured reverse mortgage is a lending program first introduced in 1961. Regulated and insured by the FHA (Federal Housing Administration), a reverse mortgage is a type of loan for homeowners age 62 and older. 

A reverse mortgage allows homeowners to obtain income or a line of credit based on their existing equity in their home. The original intent of this type of mortgage, also known as a Home Equity Conversion Mortgage (HECM), was to provide a means for seniors to age in their homes using the equity they’ve built up over the years.

Requirements to Obtain a Reverse Mortgage

Reverse mortgages require that the borrowers live on the property as their primary residence, whether it be a single-family dwelling, a condominium, or a manufactured home.

Various rules apply to the property and the borrowers. Among them are the following:

  • The property must undergo an appraisal to set the value of the loan.
  • Borrowers must demonstrate through their financial documents that they are able to keep up with payments for homeowners’ insurance, property taxes, and basic home maintenance, as well as other debts they may have acquired.
  • Borrowers must attend a counseling session with an FHA-approved counselor to ensure they understand whether taking out a reverse mortgage is the best financial move for them.

What the Reverse Mortgage Can Do

In the first year of the loan, borrowers may use up to 60% of the loan to pay off a current mortgage on the home plus 10% (whichever is higher). In year two, they may access the remaining amount.

The loan is repaid upon sale of the home. If there is not enough from the sale of the home to repay the loan, FHA insurance covers the rest.

A non-borrowing surviving spouse may continue to live in the home after the death of the borrower.

For More Information

There’s much more to learn about reverse mortgages before you decide on this alternative for your future. If you’d like a more in-depth explanation, call Sales Associate Larson Miniard at 904-460-2938 or email larson@lafontanafl.com.