A Reverse Mortgage is a loan that allows you to access some of the equity in your home to obtain cash now.
The amount you receive is primarily based on:
- the current interest rate
- age of the youngest borrower
- the appraised value of the home (up to certain limits)
In general, the older you are, the more valuable your home, and the lower your loan balance, the more money you can expect to receive from a Reverse Mortgage.
You can get your money in a lump sum, fixed monthly payments, a line of credit that you can draw upon as needed or a combination of these options. You can use the funds any way you want – to pay bills, meet future financial obligations, or simply enhance your lifestyle. Repayment is not due as long as you live in the home as your primary residence, continue to pay required property taxes and homeowner's insurance and maintain the home according to FHA requirements.
History of Reverse Mortgages
During the 1970s, several private banks offered Reverse Mortgage-style loans. These helped seniors remain in their home by using their homes' equity to pay off the mortgage. However, these early Reverse Mortgages didn't provide the protections today's loans do. In 1987, the U.S. Department of Housing and Urban Development (HUD) established a trial program issuing government-insured Reverse Mortgages, and the Home Equity Conversion Mortgage, or HECM, was born. Since then, HECM Reverse Mortgages have rapidly grown in popularity. The secure, government-insured loans have enabled thousands of seniors to obtain cash to supplement their retirement income.