The Reverse Mortgage Explained
A reverse mortgage is a special type of loan which enables homeowners age 62 and above to convert part of the equity in their home into tax-free cash without having to sell the home, give up title, or take on a new monthly mortgage payment. A reverse mortgage will not affect Social Security or Medicare, and there are no health qualifications or stipulations on the use of the proceeds. And although no monthly mortgage payments are required, you are free to make mortgage payments at any time throughout the year. The best part is that if there is sufficient equity in your home, you can rid yourself of mortgage payments forever and even buy a home with a reverse mortgage!
Currently, the federally insured reverse mortgage or Home Equity Conversion Mortgage (HECM) is managed by the Department of Housing and Urban Development (HUD) and insured by the FHA. Here are the qualifications:
* Be at least 62 years of age at closing and own your own home
* Reside in a single family home as your primary residence
* Home Type: 1-4 unit properties (you must live in one of the units), FHA-approved condos, PUDs, manufactured homes, some mixed-use
* New home type for New York: reverse mortgages are now approved for NY on COOPERATIVES (coops).
(These are proprietary reverse mortgage products, not FHA.)
* Reverse mortgage counseling is required
* You cannot be delinquent on any federal debt
If your home is valued at over $500,000, there is a proprietary reverse mortgage available. A reverse mortgage comparison will outline which program is best for you whether FHA HECM or a proprietary reverse jumbo (SEE BELOW - JUMBO REVERSE MORTGAGES).