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Federal data indicate that more than 80% of people over 65 owned homes in 2007. FHA reverse mortgages can provide cash and eliminate home loan payments while helping seniors stay in their homes.

FHA Reverse Mortgage Loans: How They Work

For homeowners 62 and older, refinancing to an FHA reverse mortgage can convert home equity to cash. Seniors typically prefer to remain in their homes for as long as possible, and a reverse mortgage can help them do so in a variety of ways. Here's some information about qualification requirements and how a reverse mortgage can be used.

FHA Guidelines for Reverse Mortgage Loans

With a reverse mortgage, homeowners do not make mortgage payments, but instead receive payments. These payments are drawn against home equity.

  • Maximum loan amount is $625,000 through 2010.
  • Existing mortgages must be paid off with proceeds of the reverse mortgage
  • Homeowners are required to receive counseling through a HUD-approved housing counselor as a condition of loan approval.

Reverse Mortgage Payment Options

FHA guidelines provide a choice of options for receiving payment from your reverse mortgage:

  • Lump sum payout: When your reverse mortgage closes, you receive a one-time payment.
  • Line of credit: You can access funds up to your available loan amount as needed.
  • Monthly payments: Get monthly payments either for a specific term or for life.
  • Combination: You can combine a partial payout and access the balance of available funds with a line of credit.

Reasons for Refinancing with a Reverse Mortgage

FHA reverse mortgage loans are designed to assist seniors with meeting financial and lifestyle needs. A reverse mortgage can provide cash for:

  • Supplemental income: Seniors on fixed incomes can use reverse mortgage proceeds for supplementing their income.
  • Home improvement and accessibility modifications: Remodeling and installing ramps, renovating bathrooms, and improving accessibility can be accomplished with funding from an FHA reverse mortgage.
  • Paying off debt: FHA guidelines require borrowers to pay for mortgage insurance, and this expense should be compared to APRs on debts before deciding to use a reverse mortgage for liquidating debt .
  • Establishing liquid savings: Funds from a reverse mortgage can help establish emergency savings.

Reverse Mortgage Loans: Getting Professional Advice

Taking out a reverse mortgage is a major financial decision. Consulting a financial advisor, estate planner, or attorney can help you understand implications of a reverse mortgage in your circumstances.


Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.