A reverse mortgage is a loan available to homeowners who are 62 years or older that enables them to convert part of their equity in their home into tax-free cash! FHA, who insures the reverse mortgage, for the benefit of the borrower, terms this a “Home Equity Conversion Mortgage” (HECM).

The product was conceived as a means to help retirees improve their quality of life utilizing the accumulated equity in their homes. The "
tax free" proceeds may be used to cover living expenses, pay for long term health care, pay off their existing mortgage and even to take that long awaited vacation. The attractive part of the HECM is that there are no restrictions on how the proceeds can be used...IT IS YOURS TO DO WHAT EVER YOU WANT!

The loan is called a reverse mortgage because the traditional mortgage everyone is used to has a payback stream that is in reverse. Instead of making payments to a lender, as with the traditional mortgage, the borrower makes no payments, with a HECM and the lender makes payments to the borrower. The HECM also has many varied options the borrower can take advantage of.

Reverse Mortgage

What is a Reverse Mortgage?

How is a Reverse Mortgage Repaid?

In the Best Interest of the senior homeowner, FHA and HUD regulate:
 

  • Loan Amounts

  • Loan Terms

  • Loan Fees

  • The Maximum and Minimum Origination Fee

 

According to the IRS, Reverse Mortgage proceeds are not income and as a result...
 

  • Proceeds are not subject to income tax (consult a local tax advisor)

  • No effect on Social Security

  • No effect on Medicare
     

HUD mortgage insurance guarantees:
 

HECM loans are non-recourse loans. This simply means that, under no circumstances, is the borrower or any member of their family held personally responsible for repayment of any part of the debt. The debt is repaid when the home is sold or refinanced by the borrower or their heirs. If the sale proceeds are insufficient to repay the debt in full, any deficiencies are paid from the FHA mortgage insurance premium (MIP). HUD guarantees that the borrowers’ funds are not at risk and no interruptions in the loan servicing process.


Counseling:
 

Once the borrower has received the basic HECM information, they must attend a third-party phone or face to face counseling session from a HUD-approved HECM counselor.


Three Day Right of Rescission:
 

The rescission period is three business days after signing the loan documents, and before the loan funds. The rescission period allows the borrower the opportunity to review their copy of the closing documents, ask questions and, if they choose, they may even cancel the transaction. The only exception to the right of rescission is in the case of a HECM for purchase transaction. In this case, there is no three day rescission period!

 

Click Here to download our informational handout about Reverse Mortgages.

Qualifications

The qualifications are simple:

  • The youngest homeowner must be 62 years of age or older.

  • Minimal income or credit qualifications.

  • Must complete third party counseling from a HUD-approved counseling agency

  • You must own the home or be purchasing a home that you will occupy as your primary residence.

  • The home must meet standard FHA appraisal guidelines.

     

Is It Safe?

In the Best Interest of the senior homeowner, FHA and HUD regulate:
 

  • Loan Amounts

  • Loan Terms

  • Loan Fees

  • The Maximum and Minimum Origination Fee

 

According to the IRS, Reverse Mortgage proceeds are not income and as a result...
 

  • Proceeds are not subject to income tax (consult a local tax advisor)

  • No effect on Social Security

  • No effect on Medicare
     

HUD mortgage insurance guarantees:
 

HECM loans are non-recourse loans. This simply means that, under no circumstances, is the borrower or any member of their family held personally responsible for repayment of any part of the debt. The debt is repaid when the home is sold or refinanced by the borrower or their heirs. If the sale proceeds are insufficient to repay the debt in full, any deficiencies are paid from the FHA mortgage insurance premium (MIP). HUD guarantees that the borrowers’ funds are not at risk and no interruptions in the loan servicing process.


Counseling:
 

Once the borrower has received the basic HECM information, they must attend a third-party phone or face to face counseling session from a HUD approved HECM counselor.


Three Day Right of Rescission:
 

The rescission period is three business days after signing the loan documents, and before the loan funds. The rescission period allows the borrower the opportunity to review their copy of the closing documents, ask questions and, if they choose, they may even cancel the transaction. The only exception to the right of rescission is in the case of a HECM for purchase transaction. In this case there is no three day rescission period!

 

Click Here to download our informational handout about Reverse Mortgages.

Cullman Office
116 2nd Street SE
Cullman, AL 35055

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(256) 734-6012

© 2019 by Brandon Snider