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DEFINITION of ‘HECM Senior Home Financing’

A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

Learn more about Reverse Mortgage >>

Top Frequently Asked Questions

HECM Senior Home Financing

If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. But take your time: a reverse mortgage can be complicated and might not be right for you. A reverse mortgage can use up the equity in your home, which means fewer assets for you and your heirs. If you do decide to look for one, review the different types of reverse mortgages, and comparison shop before you decide on a particular company.

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Borrower Requirements and Responsibilities

A reverse mortgage is a type of loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their home into cash.

The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds are used.

The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

The borrower is not required to pay back the loan until the home is sold or otherwise vacated.  As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and condominium fees (if applicable).

Features of Reverse Mortgages

With a reverse mortgage, the borrower always retains title or ownership of the home. The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.

The amount of funds that a borrower is eligible for depends on his or her age (or, in the case of couples the age of the younger spouse), the value of the home, interest rates and upfront costs. The older the borrower, the more proceeds he or she may receive.

Types of Reverse Mortgages

HECM is the commonly used acronym for a Home Equity Conversion Mortgage, a reverse mortgage created by and regulated by the U.S. Department of Housing and Urban Development.

A HECM is not a government loan. It is a loan issued by a mortgage lender, but insured by the Federal Housing Administration, which is part of HUD. Each year the borrower is charged an insurance fee of 1.25% of the loan balance. Your loan balance thus increases by the amount of this fee. The insurance purchased by this fee protects the borrower (1) if and when the lender is not able to make a payment; and (2) if the value of the home upon selling is not enough to cover the loan balance. In the latter case, the government insurance fund pays off the remaining balance.

Currently, HECMs make up most reverse mortgages offered in America. HECMs come with rules and regulations that include a requirement that the borrower receive third-party counseling.

HECM Options

Single Disbursement Lump Sum Option

To help preserve equity in the home, the borrower can take a lesser amount of funds than he or she may qualify for.

For example, if the borrower is eligible for a $100,000 loan, but only needs $30,000 to fix the roof, they can take the lesser amount. A one-time lump sum payment is made to the borrower. 

The one drawback is that if the borrower wanted more money at a later time, he or she would have to refinance and get a new reverse mortgage and pay closing costs all over again.

For Purchase

While the typical retiree uses a HECM to eliminate debts, pay for healthcare and/or cover daily living expenses, a growing segment of the senior population is using it to purchase a home that better suits their needs.

The advantage of using HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds. This home buying process leaves you with no monthly mortgage payments.

While study after study reveals that an overwhelming percentage of seniors want to continue living in their current home for as long as possible, for some people that isn’t the best, or safest, option. HECM for Purchase offers a solution to downsize into a place that’s more easily navigable, possibly more energy efficient, with lower maintenance costs, or which is closer to friends and family.

Summary of HUD Changes

The Section by Section Summary of the 2013 HOME Final Rule summarizes all the changes made to the HOME regulations to help participating jurisdictions, community housing development organizations, and program participants understand and comply with the new requirements. For each change in the regulation, this resource:

  • Summarizes and describes each rule change
  • Provides recommendations for how PJs can implement the new requirements
  • Identifies the effective date for implementing each new requirement

Sections that have changed in the 2013 HOME Final Rule appear in underlined, orange font.

Click on the section title to view a summary of changes to a section.

Advice for Children of Seniors

Should My Mom and Dad Get a Reverse Mortgage?

You are referred to as the “Sandwich Generation.”  You’ve got kids in or heading for college as well as retired parents.  Wherever you look, all you can see is additional expenses.

In the rough economy of the past few years–with home values and retirement savings down, government benefit programs threatened and people living longer–many children of seniors are concerned about their parents being able to finance the remainder of their lives, even if they have been diligent about retirement planning.

The vast majority of America’s seniors have their wealth in their home equity.   And if your parents are struggling to meet their month-to-month expenses or paying for health expenses, tapping into that equity may be the best solution.  A reverse mortgages is a financial product that allows them to do just that.

Whether or not a reverse mortgage is the right financial option for your parents is a very personal decision and based on many factors.  In most cases, your parents will discuss this option with you before making their decision.  You want to be prepared to give them the best advice. Here are some questions you most likely will want answered:

What is a reverse mortgage?

A reverse mortgage is a loan available to homeowners over 62 years of age that enables them to convert part of the equity in their home into cash.  

The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed.  Instead of making monthly payments to a lender (as with a traditional mortgage), the lender makes payments to the borrower.

What do people use reverse mortgages for?

Reverse mortgages were conceived as a means to help people in or near retirement who have limited income use the money they have put into their home to pay off debts (including traditional mortgages), cover basic monthly living expenses or pay for health care.  There is no restriction on how a borrower may use their reverse mortgage proceeds.

Will a reverse mortgage increase my parents’ monthly expenses?

No. Borrowers are not required to pay back the loan until the home is sold or otherwise vacated.  As long as they live in the home, they are not required to make any monthly payments towards the loan balance, but they must remain current on tax and insurance payments.

If my parents take a reverse mortgage, does the bank then own their home?

No. With a reverse mortgage, the borrower always retains title to or ownership of the home.  The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.

How much money can my parents expect?

The amount of funds they are eligible for depends on the age of the youngest parent, the value of the home, the interest rate and upfront costs. The older a person is, the more proceeds he or she can receive.

Funds can be delivered as a lump sum, as a line of credit or as fixed monthly payments, either for a specified period of time or for as long as your parents live in the home. They can also use more than one of these options, for example, take part of the proceeds as a lump sum and leave the balance in a line of credit.

How much will the loan cost my parents?

Loan fees can be paid out of the loan proceeds.  This means a borrower incurs very little out-of-pocket expense to get a reverse mortgage.  The only out-of-pocket expenses are the appraisal and possibly the counseling session (depending on which counseling agency you work with), which together total a few hundred dollars.

When the loan is eventually paid off, the balance equals the amount borrowed, plus interest and mortgage insurance.  The loan balance grows as the borrower continues to live in the home.  In other words, when the borrower sells or leaves the house, he or she will owe more than originally borrowed.  Look at it this way:  A traditional mortgage is a balloon full of air that loses some air and gets smaller each time a payment is made..  A reverse mortgage is an empty balloon that grows larger as time passes.

If when my parents move or die and the balance is more than the value of the home, am I then responsible?

No matter how large the loan balance, your parents (or their heirs) will never have to pay more than the appraised value of the home or the sale price.  This feature is referred to as non-recourse. If the loan balance exceeds the appraised value of the home, then the federal government absorbs that loss. The government pays for it with proceeds from its insurance fund, which the borrower pays into on a monthly basis.  

If my parents get a reverse mortgage, what are their responsibilities?

Primary lien: A reverse mortgage must be the primary lien on a home.  Any prior mortgage must be paid in full to acquire the reverse mortgage.  (Reverse mortgage proceeds can be used for this purpose,)

Occupancy requirements: The property used as collateral for the reverse mortgage must be your parents’ primary residence.

Taxes and Insurance: Your parents are required to remain current on their real estate taxes, home insurance, and, if applicable, condo fees or they are susceptible to default.

Property Condition: Your parents are responsible for completing mandatory repairs and maintaining the condition of their property.

Rights of Non-Borrower Residents at Time of Loan Termination: If there is a non-borrower resident living in the home who is not on title, it’s important that they understand what happens when the owner on title permanently vacates the property, either by death or move out, and the loan becomes due and payable. It’s important that these issues be discussed with a reverse mortgage loan officer prior to the loan closing. In the case of a couple, if one spouse is under 62, it may be possible for that person to continue living in the home after the older spouse passes away, as long as certain conditions are met.

If a disabled son or daughter is living at home, and the parents get a reverse mortgage, that son or daughter may have to look for alternative housing options once the loan becomes due and payable, unless other arrangements are made ahead of time  to pay off the reverse mortgage.

But my parents want to downsize.  How can a reverse mortgage help them?

While the typical retiree uses a reverse mortgage to eliminate debts, pay for healthcare and/or cover daily living expenses, a growing segment of the senior population is using it to purchase a home that better suits their needs.

The advantage of using what is known as a HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds.  This home buying process leaves the homeowner with no monthly mortgage payments.

How do my parents learn enough about reverse mortgages to make an informed evaluation and decision?

A homeowner contacts a reverse mortgage lender.  We highly recommend that the lender  is a member of the National Reverse Mortgage Lenders Association.

A list of NRMLA member lenders can be found by visiting reversemortgage.orgPlease click on “Find a Lender.”

Calculate How Much Money You Can Get

How much can you borrow?

This tool will help you estimate how much you can afford to borrow to buy a home. We’ll work it out by looking at your income and your outgoings. Mortgage lenders will look at these figures very closely to work out how much they’ll offer you.

It should take about five minutes to complete.

What are the costs?

Lenders use different terms to describe their fees, so it’s important to properly check all the costs that come with the mortgage.

Some mortgage deals may seem attractive but the fees can quickly add up. When comparing mortgage offers, add up all the charges over the length of the deal as well as your monthly repayments.

For example, if your repayments are £1,000 per month on a two-year fixed-rate mortgage, plus £300 in fees, the total cost of the deal is £24,300.

Cautions

As with any financial transaction–be it a mortgage, a credit card or even a bank account–there are specific rules and obligations attached to reverse mortgages. Some of them are unique to this particular financial product. You may be accustomed to such items being buried in fine print. With reverse mortgages, both loan officers and counselors will explain these specifics to you as part of the loan process.

Among the rules and obligations you need to be aware of are:

  • Everyone listed on the deed of a home owned by someone seeking a reverse mortgage must be over 62 years old;
  • If one spouse is under 62, that person’s name must be removed from the title. It may be possible for the underage spouse to continue living in the home after the older spouse passes away, provided they meet certain conditions. It’s important to discuss these issues with the reverse mortgage loan officer;
  • A reverse mortgage must be the only lien on a property. This means, in order to obtain a reverse mortgage you must pay off any existing traditional mortgage. You can use your reverse mortgage proceeds to pay off your traditional mortgage;
  • A reverse mortgage holder is responsible for staying current on their real estate taxes and homeowner’s insurance. If you go into arrears, you take the risk of being forced into default;
  • A reverse mortgage holder is responsible for maintenance of the home;
  • The home must be your primary residence, which means you must live there more than 183 days a year;
  • You are only permitted to live out of your home for a total of twelve months. This means, if you find yourself in, say, an extended care situation, or on an extended out-of-town work situation, you must approach your lender and discuss;
  • Loan originators are not permitted to require that you purchase other financial products (i.e., annuities, long term care insurance) as a condition for getting a reverse mortgage. If they do, you should report this to HUD or NRMLA.

25 Ways to Use a HECM

  1. Pay off your forward mortgage to reduce your monthly expenses.
  2. Re-model your home to accommodate aging limitations.
  3. Maintain a line of credit (that grows) for health emergencies and surprises.
  4. Cover monthly expenses and hold on to other assets while their value continues to grow.
  5. Cover monthly expenses and avoid selling assets at depressed values.
  6. Pay for health insurance during early retirement years until Medicare eligible at 65.
  7. Pay your Medicare Part B and Part D costs.
  8. Combine life tenure payments with Social Security and income generated by assets to replace your salary and maintain your monthly routine of paying bills from new income.
  9. Pay for your children’s or grandchildren’s college or professional education.
  10. Maintain a “standby” cash reserve to get you through the ups and downs of investment markets and give you more flexibility
  11. Combine proceeds with sale of one home to buy a new home without a forward mortgage and monthly mortgage payments.
  12. Pay for long-term care needs
  13. Fill the gap in a retirement plan caused by lower than expected returns on your assets.
  14. Pay for short term in-home care or physical therapy following an accident or medical episode.
  15. Pay for a retirement plan, estate plan or a will.
  16. Convert a room or basement to a living facility for an aging parent, relative or caregiver.
  17. Set up transportation arrangements for when you are no longer comfortable driving.
  18. Create a set aside to pay real estate taxes and property insurance.
  19. Delay collecting Social Security benefit until it maxes out at age 70 1/2.
  20. Eliminate credit card debt and avoid building new credit debt.
  21. Cover monthly expenses in between jobs or during career transition without utilizing other saved assets.
  22. Cover expenses and avoid capital gains tax consequences of selling off other assets.
  23. Purchase health-related technology that enables you to live in home alone.
  24. Pay for an Uber or Lyft account so you have mobility and access to appointments and social activities.
  25. Help your adult children through family emergencies.

An Inside Look

 CONTRARY TO AESOP’S PROVERB THAT “familiarity breeds contempt,” I find that familiarity breeds comfort.

We like to peek at restaurant menus before we make a reservation. We like to look at photos of hotels before we book them. And who doesn’t rush the folks behind the popcorn counter so we don’t miss the coming attraction movie trailers?

Trying something new is always a risk, but the right introductory tools can make us feel it is less of a risk.

And so our team here at the National Reverse Mortgage Lenders Association thought it would be comforting to people considering reverse mortgage loans if we could usher them through the process in advance.

A couple of years ago, we published “Your Road Map to a Reverse Mortgage,” which described the process step-by-step. This popular guide has been distributed by members to thousands of potential clients and remains available.

In this issue of Reverse Mortgage Magazine, “You Are There: A Box Seat View of the Reverse Mortgage Process,” we take the curious directly inside of the process. Call this our reality- television-in-print view.

In this issue you will:

You will also have a sneak peek at a potential new additional step in the process: post-closing counseling. Currently in a pilot test stage being conducted by ClearpointCredit Counseling Solutions and researchers at Ohio StateUniversity, this step would give borrowers an opportunity to meet again with a counselor one and two years after first taking their loan to evaluate their progress and make sure they are on track and able to fulfill their responsibilities.

For aging Americans and their children, we hope this look at reverse mortgages will make you comfortable enough to make a call to begin the borrowing process.

For industry professionals, we hope this will give you a better sense of what jobs in the business other than your own may entail.

For reporters and government officials, we hope this will provide a clearer understanding of the level of service provided to seniors considering a reverse mortgage.

And in addition to all the valuable information here, the journey through this process tells a good old story. Buckle your seat belts.

The Smart Choices

It’s easier.

We start by meeting you at a time and place that suits you – at home, at work or over a coffee; during the week, at night or over the weekend – we’re always flexible. We’ll look at your current loans and financial circumstances and then research and find the right solution for you. We take care of the paperwork, manage the application process and then take it through to settlement.

It’s fast.

We can get things moving quickly. We’ll work with our lender networks and contacts, securing your finance as fast as possible.

It’s more than just loans.

Lenders will ask you to take out insurance on your new property. We can help you arrange cover to keep the approval process moving quickly and hopefully save you some money.

It’s all about you.

We work for you and not the bank. We get to know you personally to understand your unique circumstances. From our experience we know which lenders will have the product that will meet your needs. And we negotiate for what’s right for you, not what’s right for the lenders.

See your benefits Today

HECM Senior Home Financing

So what is a reverse mortgage? A reverse mortgage is a type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.

Learn more about Reverse Mortgage >>

Top Frequently Asked Questions

HECM Senior Home Financing

If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. But take your time: a reverse mortgage can be complicated and might not be right for you. A reverse mortgage can use up the equity in your home, which means fewer assets for you and your heirs. If you do decide to look for one, review the different types of reverse mortgages, and comparison shop before you decide on a particular company.

[/vc_column]

Borrower Requirements and Responsibilities

A reverse mortgage is a type of loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their home into cash.

The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds are used.

The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

The borrower is not required to pay back the loan until the home is sold or otherwise vacated.  As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and condominium fees (if applicable).

Features of Reverse Mortgages

With a reverse mortgage, the borrower always retains title or ownership of the home. The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.

The amount of funds that a borrower is eligible for depends on his or her age (or, in the case of couples the age of the younger spouse), the value of the home, interest rates and upfront costs. The older the borrower, the more proceeds he or she may receive.

Types of Reverse Mortgages

HECM is the commonly used acronym for a Home Equity Conversion Mortgage, a reverse mortgage created by and regulated by the U.S. Department of Housing and Urban Development.

A HECM is not a government loan. It is a loan issued by a mortgage lender, but insured by the Federal Housing Administration, which is part of HUD. Each year the borrower is charged an insurance fee of 1.25% of the loan balance. Your loan balance thus increases by the amount of this fee. The insurance purchased by this fee protects the borrower (1) if and when the lender is not able to make a payment; and (2) if the value of the home upon selling is not enough to cover the loan balance. In the latter case, the government insurance fund pays off the remaining balance.

Currently, HECMs make up most reverse mortgages offered in America. HECMs come with rules and regulations that include a requirement that the borrower receive third-party counseling.

HECM Options

Single Disbursement Lump Sum Option

To help preserve equity in the home, the borrower can take a lesser amount of funds than he or she may qualify for.

For example, if the borrower is eligible for a $100,000 loan, but only needs $30,000 to fix the roof, they can take the lesser amount. A one-time lump sum payment is made to the borrower. 

The one drawback is that if the borrower wanted more money at a later time, he or she would have to refinance and get a new reverse mortgage and pay closing costs all over again.

For Purchase

While the typical retiree uses a HECM to eliminate debts, pay for healthcare and/or cover daily living expenses, a growing segment of the senior population is using it to purchase a home that better suits their needs.

The advantage of using HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds. This home buying process leaves you with no monthly mortgage payments.

While study after study reveals that an overwhelming percentage of seniors want to continue living in their current home for as long as possible, for some people that isn’t the best, or safest, option. HECM for Purchase offers a solution to downsize into a place that’s more easily navigable, possibly more energy efficient, with lower maintenance costs, or which is closer to friends and family.

Summary of HUD Changes

The Section by Section Summary of the 2013 HOME Final Rule summarizes all the changes made to the HOME regulations to help participating jurisdictions, community housing development organizations, and program participants understand and comply with the new requirements. For each change in the regulation, this resource:

  • Summarizes and describes each rule change
  • Provides recommendations for how PJs can implement the new requirements
  • Identifies the effective date for implementing each new requirement

Sections that have changed in the 2013 HOME Final Rule appear in underlined, orange font.

Click on the section title to view a summary of changes to a section.

Advice for Children of Seniors

Should My Mom and Dad Get a Reverse Mortgage?

You are referred to as the “Sandwich Generation.”  You’ve got kids in or heading for college as well as retired parents.  Wherever you look, all you can see is additional expenses.

In the rough economy of the past few years–with home values and retirement savings down, government benefit programs threatened and people living longer–many children of seniors are concerned about their parents being able to finance the remainder of their lives, even if they have been diligent about retirement planning.

The vast majority of America’s seniors have their wealth in their home equity.   And if your parents are struggling to meet their month-to-month expenses or paying for health expenses, tapping into that equity may be the best solution.  A reverse mortgages is a financial product that allows them to do just that.

Whether or not a reverse mortgage is the right financial option for your parents is a very personal decision and based on many factors.  In most cases, your parents will discuss this option with you before making their decision.  You want to be prepared to give them the best advice. Here are some questions you most likely will want answered:

What is a reverse mortgage?

A reverse mortgage is a loan available to homeowners over 62 years of age that enables them to convert part of the equity in their home into cash.  

The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed.  Instead of making monthly payments to a lender (as with a traditional mortgage), the lender makes payments to the borrower.

What do people use reverse mortgages for?

Reverse mortgages were conceived as a means to help people in or near retirement who have limited income use the money they have put into their home to pay off debts (including traditional mortgages), cover basic monthly living expenses or pay for health care.  There is no restriction on how a borrower may use their reverse mortgage proceeds.

Will a reverse mortgage increase my parents’ monthly expenses?

No. Borrowers are not required to pay back the loan until the home is sold or otherwise vacated.  As long as they live in the home, they are not required to make any monthly payments towards the loan balance, but they must remain current on tax and insurance payments.

If my parents take a reverse mortgage, does the bank then own their home?

No. With a reverse mortgage, the borrower always retains title to or ownership of the home.  The lender never, at any point, owns the home even after the last surviving spouse permanently vacates the property.

How much money can my parents expect?

The amount of funds they are eligible for depends on the age of the youngest parent, the value of the home, the interest rate and upfront costs. The older a person is, the more proceeds he or she can receive.

Funds can be delivered as a lump sum, as a line of credit or as fixed monthly payments, either for a specified period of time or for as long as your parents live in the home. They can also use more than one of these options, for example, take part of the proceeds as a lump sum and leave the balance in a line of credit.

How much will the loan cost my parents?

Loan fees can be paid out of the loan proceeds.  This means a borrower incurs very little out-of-pocket expense to get a reverse mortgage.  The only out-of-pocket expenses are the appraisal and possibly the counseling session (depending on which counseling agency you work with), which together total a few hundred dollars.

When the loan is eventually paid off, the balance equals the amount borrowed, plus interest and mortgage insurance.  The loan balance grows as the borrower continues to live in the home.  In other words, when the borrower sells or leaves the house, he or she will owe more than originally borrowed.  Look at it this way:  A traditional mortgage is a balloon full of air that loses some air and gets smaller each time a payment is made..  A reverse mortgage is an empty balloon that grows larger as time passes.

If when my parents move or die and the balance is more than the value of the home, am I then responsible?

No matter how large the loan balance, your parents (or their heirs) will never have to pay more than the appraised value of the home or the sale price.  This feature is referred to as non-recourse. If the loan balance exceeds the appraised value of the home, then the federal government absorbs that loss. The government pays for it with proceeds from its insurance fund, which the borrower pays into on a monthly basis.  

If my parents get a reverse mortgage, what are their responsibilities?

Primary lien: A reverse mortgage must be the primary lien on a home.  Any prior mortgage must be paid in full to acquire the reverse mortgage.  (Reverse mortgage proceeds can be used for this purpose,)

Occupancy requirements: The property used as collateral for the reverse mortgage must be your parents’ primary residence.

Taxes and Insurance: Your parents are required to remain current on their real estate taxes, home insurance, and, if applicable, condo fees or they are susceptible to default.

Property Condition: Your parents are responsible for completing mandatory repairs and maintaining the condition of their property.

Rights of Non-Borrower Residents at Time of Loan Termination: If there is a non-borrower resident living in the home who is not on title, it’s important that they understand what happens when the owner on title permanently vacates the property, either by death or move out, and the loan becomes due and payable. It’s important that these issues be discussed with a reverse mortgage loan officer prior to the loan closing. In the case of a couple, if one spouse is under 62, it may be possible for that person to continue living in the home after the older spouse passes away, as long as certain conditions are met.

If a disabled son or daughter is living at home, and the parents get a reverse mortgage, that son or daughter may have to look for alternative housing options once the loan becomes due and payable, unless other arrangements are made ahead of time  to pay off the reverse mortgage.

But my parents want to downsize.  How can a reverse mortgage help them?

While the typical retiree uses a reverse mortgage to eliminate debts, pay for healthcare and/or cover daily living expenses, a growing segment of the senior population is using it to purchase a home that better suits their needs.

The advantage of using what is known as a HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds.  This home buying process leaves the homeowner with no monthly mortgage payments.

How do my parents learn enough about reverse mortgages to make an informed evaluation and decision?

A homeowner contacts a reverse mortgage lender.  We highly recommend that the lender  is a member of the National Reverse Mortgage Lenders Association.

A list of NRMLA member lenders can be found by visiting reversemortgage.orgPlease click on “Find a Lender.”

Calculate How Much Money You Can Get

How much can you borrow?

This tool will help you estimate how much you can afford to borrow to buy a home. We’ll work it out by looking at your income and your outgoings. Mortgage lenders will look at these figures very closely to work out how much they’ll offer you.

It should take about five minutes to complete.

What are the costs?

Lenders use different terms to describe their fees, so it’s important to properly check all the costs that come with the mortgage.

Some mortgage deals may seem attractive but the fees can quickly add up. When comparing mortgage offers, add up all the charges over the length of the deal as well as your monthly repayments.

For example, if your repayments are £1,000 per month on a two-year fixed-rate mortgage, plus £300 in fees, the total cost of the deal is £24,300.

Cautions

As with any financial transaction–be it a mortgage, a credit card or even a bank account–there are specific rules and obligations attached to reverse mortgages. Some of them are unique to this particular financial product. You may be accustomed to such items being buried in fine print. With reverse mortgages, both loan officers and counselors will explain these specifics to you as part of the loan process.

Among the rules and obligations you need to be aware of are:

  • Everyone listed on the deed of a home owned by someone seeking a reverse mortgage must be over 62 years old;
  • If one spouse is under 62, that person’s name must be removed from the title. It may be possible for the underage spouse to continue living in the home after the older spouse passes away, provided they meet certain conditions. It’s important to discuss these issues with the reverse mortgage loan officer;
  • A reverse mortgage must be the only lien on a property. This means, in order to obtain a reverse mortgage you must pay off any existing traditional mortgage. You can use your reverse mortgage proceeds to pay off your traditional mortgage;
  • A reverse mortgage holder is responsible for staying current on their real estate taxes and homeowner’s insurance. If you go into arrears, you take the risk of being forced into default;
  • A reverse mortgage holder is responsible for maintenance of the home;
  • The home must be your primary residence, which means you must live there more than 183 days a year;
  • You are only permitted to live out of your home for a total of twelve months. This means, if you find yourself in, say, an extended care situation, or on an extended out-of-town work situation, you must approach your lender and discuss;
  • Loan originators are not permitted to require that you purchase other financial products (i.e., annuities, long term care insurance) as a condition for getting a reverse mortgage. If they do, you should report this to HUD or NRMLA.

25 Ways to Use a HECM

  1. Pay off your forward mortgage to reduce your monthly expenses.
  2. Re-model your home to accommodate aging limitations.
  3. Maintain a line of credit (that grows) for health emergencies and surprises.
  4. Cover monthly expenses and hold on to other assets while their value continues to grow.
  5. Cover monthly expenses and avoid selling assets at depressed values.
  6. Pay for health insurance during early retirement years until Medicare eligible at 65.
  7. Pay your Medicare Part B and Part D costs.
  8. Combine life tenure payments with Social Security and income generated by assets to replace your salary and maintain your monthly routine of paying bills from new income.
  9. Pay for your children’s or grandchildren’s college or professional education.
  10. Maintain a “standby” cash reserve to get you through the ups and downs of investment markets and give you more flexibility
  11. Combine proceeds with sale of one home to buy a new home without a forward mortgage and monthly mortgage payments.
  12. Pay for long-term care needs
  13. Fill the gap in a retirement plan caused by lower than expected returns on your assets.
  14. Pay for short term in-home care or physical therapy following an accident or medical episode.
  15. Pay for a retirement plan, estate plan or a will.
  16. Convert a room or basement to a living facility for an aging parent, relative or caregiver.
  17. Set up transportation arrangements for when you are no longer comfortable driving.
  18. Create a set aside to pay real estate taxes and property insurance.
  19. Delay collecting Social Security benefit until it maxes out at age 70 1/2.
  20. Eliminate credit card debt and avoid building new credit debt.
  21. Cover monthly expenses in between jobs or during career transition without utilizing other saved assets.
  22. Cover expenses and avoid capital gains tax consequences of selling off other assets.
  23. Purchase health-related technology that enables you to live in home alone.
  24. Pay for an Uber or Lyft account so you have mobility and access to appointments and social activities.
  25. Help your adult children through family emergencies.

An Inside Look

 CONTRARY TO AESOP’S PROVERB THAT “familiarity breeds contempt,” I find that familiarity breeds comfort.

We like to peek at restaurant menus before we make a reservation. We like to look at photos of hotels before we book them. And who doesn’t rush the folks behind the popcorn counter so we don’t miss the coming attraction movie trailers?

Trying something new is always a risk, but the right introductory tools can make us feel it is less of a risk.

And so our team here at the National Reverse Mortgage Lenders Association thought it would be comforting to people considering reverse mortgage loans if we could usher them through the process in advance.

A couple of years ago, we published “Your Road Map to a Reverse Mortgage,” which described the process step-by-step. This popular guide has been distributed by members to thousands of potential clients and remains available.

In this issue of Reverse Mortgage Magazine, “You Are There: A Box Seat View of the Reverse Mortgage Process,” we take the curious directly inside of the process. Call this our reality- television-in-print view.

In this issue you will:

You will also have a sneak peek at a potential new additional step in the process: post-closing counseling. Currently in a pilot test stage being conducted by ClearpointCredit Counseling Solutions and researchers at Ohio StateUniversity, this step would give borrowers an opportunity to meet again with a counselor one and two years after first taking their loan to evaluate their progress and make sure they are on track and able to fulfill their responsibilities.

For aging Americans and their children, we hope this look at reverse mortgages will make you comfortable enough to make a call to begin the borrowing process.

For industry professionals, we hope this will give you a better sense of what jobs in the business other than your own may entail.

For reporters and government officials, we hope this will provide a clearer understanding of the level of service provided to seniors considering a reverse mortgage.

And in addition to all the valuable information here, the journey through this process tells a good old story. Buckle your seat belts.

The Smart Choices

It’s easier.

We start by meeting you at a time and place that suits you – at home, at work or over a coffee; during the week, at night or over the weekend – we’re always flexible. We’ll look at your current loans and financial circumstances and then research and find the right solution for you. We take care of the paperwork, manage the application process and then take it through to settlement.

It’s fast.

We can get things moving quickly. We’ll work with our lender networks and contacts, securing your finance as fast as possible.

It’s more than just loans.

Lenders will ask you to take out insurance on your new property. We can help you arrange cover to keep the approval process moving quickly and hopefully save you some money.

It’s all about you.

We work for you and not the bank. We get to know you personally to understand your unique circumstances. From our experience we know which lenders will have the product that will meet your needs. And we negotiate for what’s right for you, not what’s right for the lenders.

See your benefits Today

About Us

America First is one of the largest, most stable, and most progressive credit unions in the country.

since its inception over seven decades ago. From low-rate loans and free online services, to mortgages and free checking accounts, America First offers a vast array of tools allowing you to manage your money, in the manner you desire.

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HECM Senior Home Financing