Facts on reverse mortgages
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, Also commonly known as Home Equity Conversion Mortgage (HECM). It is
a unique type of loan for homeowners aged 62 and older that lets
borrowers convert a portion of the equity in their home into cash. Unlike a
traditional home equity loan or second mortgage, borrowers don't have to
repay the loan until they either no longer live in the home as their principal
residence or they fail to meet the obligations of the mortgage. It is risky
since borrower's may not be able to get out of the loan without selling the
home to pay off the debt.
Reverse mortgages take the equity that has accumulated over time in an
elderly borrower's home and pay it back to them through either installment
payments, line of credit, or in a lump sum.
- The borrower must be at least 62 years old, and
- Have a principal residence that is either paid off, or
- Have a low mortgage balance that can be paid off at settlement with the
proceeds from the reverse loan
- Mandatory counseling is required before they can apply
- Negative amortization
- No escrows for taxes and insurances
Permissible percentage of total equity allowed for withdrawal
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This amount is called "the Principal limit"
The borrower's age, the interest rate on the loan, and the equity in the
borrower's home determines the loan's principal limit.
60% of the home's equity
Requirements of reverse mortgage advertisements
Give this one a try later!
Give this one a try later!
, Also commonly known as Home Equity Conversion Mortgage (HECM). It is
a unique type of loan for homeowners aged 62 and older that lets
borrowers convert a portion of the equity in their home into cash. Unlike a
traditional home equity loan or second mortgage, borrowers don't have to
repay the loan until they either no longer live in the home as their principal
residence or they fail to meet the obligations of the mortgage. It is risky
since borrower's may not be able to get out of the loan without selling the
home to pay off the debt.
Reverse mortgages take the equity that has accumulated over time in an
elderly borrower's home and pay it back to them through either installment
payments, line of credit, or in a lump sum.
- The borrower must be at least 62 years old, and
- Have a principal residence that is either paid off, or
- Have a low mortgage balance that can be paid off at settlement with the
proceeds from the reverse loan
- Mandatory counseling is required before they can apply
- Negative amortization
- No escrows for taxes and insurances
Permissible percentage of total equity allowed for withdrawal
Give this one a try later!
This amount is called "the Principal limit"
The borrower's age, the interest rate on the loan, and the equity in the
borrower's home determines the loan's principal limit.
60% of the home's equity
Requirements of reverse mortgage advertisements
Give this one a try later!
