Understanding Reverse Mortgages

Reverse Mortgages

A reverse mortgage is a loan to homeowners 62 years or older. This loan enables seniors to convert the equity they have built over the years in their home into cash for home improvements, medical modifications, supplement Social security or for any other needs they may have. It’s a product that allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills.

Some advantages of the reverse mortgage:

• no monthly payments
• cash proceeds are tax free
• no effect on Social Security or Medicare benefits
• no restrictions on use of funds
• retain ownership

The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program, which enables you to withdraw some of the equity in your home.  The HECM is a safe plan that can give older Americans greater financial security even if they did not purchase their home with an FHA insured mortgage.

The loan is called a reverse mortgage because the traditional mortgage payback is reversed. Instead of making monthly payments to the lender, the lender makes payments to the homeowner.

The homeowner is not required to pay back the loan until the home is sold or vacated. As long as the homeowner lives in the home, you are not required to make monthly payments towards the loan balance. The homeowner must continue to pay property taxes, homeowners insurance and any HOA or condo fees if applicable.

When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds beyond the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to heirs.  No debt is passed along to the estate or heirs.

Seniors should consider all their options. They may qualify for less costly alternatives.

Ask about loan or grant programs for home repairs or improvements.

Resources

The following organizations may have additional information:

*The National Council on Aging (800) 510-0301.

*www.eldercare.gov or  1-800-677-1116.

*Carroll County Bureau of Aging  at

http://ccgovernment.carr.org/ccg/aging/ or call 410-386-3800

*Howard County Bureau of Aging at 410-313-5980 or

http://www.howardcountymd.gov/Departments.aspx?ID=4294967715

*Baltimore County Bureau of Aging or 410-887-2594

http://www.baltimorecountymd.gov/Agencies/aging

*Frederick County Bureau of Aging  at 301-600-1605

https://frederickcountymd.gov/index.aspx?nid=54

*AARP Foundation 1-800-209-8085

*HEMC counselor- 800-569-4287

For additional information available on reverse mortgages:  http://reversemortgageguides.org

Please contact your bank representative or contact us and we will give you names of local lenders offering this program.