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HUD Reverse Mortgage Loan Program For Seniors
Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the borrower lives in the home. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more.
Reverse mortgages are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you. The U.S. Department of Housing and Urban Development (HUD) created one of the first Reverse Mortgage Loan Programs. HUD's Reverse Mortgage is a federally-insured private loan. FHA's reverse mortgage insurance makes HUD's program less expensive to borrowers than the smaller reverse mortgage programs run by private lenders without FHA insurance. You can receive free information about reverse mortgages by calling AARP at: 1-800-209-8085, toll-free. How Does HUD's Reverse Mortgage Program Work? Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining are eligible to participate in HUD's reverse mortgage program. The program allows homeowners to convert the equity in his/her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well. What's the difference between a reverse mortgage loan and a bank home equity loan? Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the borrower lives in the home. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage. With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment." How do I receive my payments? Homeowners can receive payments in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Homeowners whose circumstances change can restructure their payment options. You have 5 options for receiving payments: 1. Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. 2. Term - equal monthly payments for a fixed period of months selected. 3. Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted. 4. Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home. 5. Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower. How do I qualify for a HUD reverse mortgage? To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area. What types of homes are eligible? Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program. How much money can I get from my home? The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. Can the lender foreclose on the mortgage? The lender cannot foreclose while you are living in the home. You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value. Do I qualify for a HUD reverse mortgage if I didn't buy my present house with FHA mortgage insurance? Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan. Will I still have an estate that I can leave to my heirs? When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs. |
