A Reverse Mortgage is a financial tool – a loan – available only to homeowners 62 and older – to allows access to equity in your principal residence. You ALWAYS Retain title to your home and share no appreciation with the lender.
You are required to 1) live in your home as your primary residence 2) continue to pay property taxes and insurance and 3) continue to maintain your home, including timely payments to your home owners association, for example.
You cannot lose your home under normal circumstances, but foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.
With a Reverse Mortgage, no repayment of principal or interest is required while living in the home (provided you comply with loan terms). Instead, interest is added to the loan and paid when the house is sold or after you move from the home. This creates the cash flow often needed to successfully “Age in Place” – remain in your home safely and securely for as long as you wish.
With today’s constantly changing market, Reverse Mortgages are one of the few options available to seniors who want to remain in their homes and need access to equity but may not qualify for a traditional equity line of credit.
Reverse Mortgage loans available in today’s marketplace can be categorized several ways. The simplest approach is to consider: 1) those loans backed by the US Government and 2) “proprietary” or jumbo loans offered by lenders and targeted at higher value properties.
Reverse Mortgages regulated and insured by the US Government (Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA)) are available under the Home Equity Conversion Mortgage (HECM) Program.
Both fixed rates and adjustable rate loans are available. But fixed rate loans are subject to different regulations.
To determine what type of loan is best for you, we consider your age, current mortgage debt, the value of your property, your risk tolerance and your financial objectives, among other considerations.
In January 2009, the HECM program was expanded to allow eligible borrowers to purchase a new principal residence using a combination of proceeds from a Reverse Mortgage loan and cash from their pockets. This program – known as “HECM for Purchase” – made it possible for homeowners to downsize fro Mega-Mansion to Cozy-Cottage, often relocating to other geographical areas to be closer to family members.
“Proprietary” mortgages, also known as jumbo loans, are available from only two lenders at this time – most disappeared in 2007 and 2008 during the recession. Jumbo loans are particularly popular in California due to our increasing property values. At this time jumbo loans are only available as fixed rate loans. But as new lenders join the marketplace, loan programs are adding features to broaden interest.