HUD Program Has the Facts About Reverse Mortgages

Category: Financial and taxes in retirement

February 4, 2014 — So misunderstood – that about sums up reverse mortgages as far as we are concerned. Hyped by some unscrupulous providers, this tool for older Americans to tap the equity in their homes for retirement has acquired if not a bad name, at least a lot of cautionary looks by potential customers. That’s why we were very happy to find a government site with some excellent background information about HUD’s Reverse Mortgage Program. The link provides a great deal of helpful facts including:

– What they are
– How the HUD program works
– Qualifications and Requirements for borrowers and properties
– Precautions and considerations
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Who is eligible
If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, and are eligible, you may participate in FHA’s Home Equity Conversion Mortgage (HECM) program. The HECM is FHA’s reverse mortgage program that enables you to withdraw some of the equity in your home with limitations or a single disbursement lump-sum payment at the time of mortgage closing.

You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

How the Program Works
There are many factors to consider before deciding whether a HECM is right for you. To aid in this process, you must meet with a HECM counselor to discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM and repaying the loan. Counselors will also discuss provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you should be able to make an independent, informed decision of whether this product will meet your specific needs. You can search online for a HECM counselor or call (800) 569-4287 toll-free.


Types of Payment Plans
You may be eligible for one of the following payment plans:

Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly payments for a fixed period of months selected.
Line of Credit – unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit and scheduled monthly payments for as long as you remain in the home.
Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
Single Disbursement Lump Sum – a single payment at loan closing.

Comments? Have you thought about taking out a reverse mortgage? Share your thoughts and experiences in the Comments section below.

For further reading:
Pension Loans Trap the Unwary
Reverse Mortgages Costing the Unwary Their Homes

Posted by Admin on February 4th, 2014

6 Comments »

  1. What happens to the property after the last borrower is gone? My guess is that someone gets a property for 50cents on the dollar.

    by Rick — February 5, 2014

  2. If the owners on the title pass on, the property is entirely the banks- nothing pertaing to this property is anybodies but the bank. Another very hiddenfact .be gery, very careful.

    by darlene eastland — February 5, 2014

  3. We would truly enjoy comments as to the actual interest rate and how this rate effects the initial mortgage amount in ten years, twenty years. What would be the amount owed on the reverse mortgage if the original loan would have been $100,000 – in ten years, twenty years?

    by Phyllis Oltmann — February 5, 2014

  4. When the owners die, their heirs can pay off the loan (amount borrowed) and claim the home, or it will be sold and what’s over after the lender is payed off – distributed to the heirs.

    by John H — February 5, 2014

  5. I’m considering the option. The funds would be used to provide an improved life quality for me in my later years (thus the “fun” in “funds”). My purpose in life is not to provide a windfall for my offspring/we no longer have the family farm or the royal castle to pass on to preserve our historical roots. My pinching pennies in later years so my kids can blow money on but another update on electronic devices seems foolish :mrgreen::mrgreen:

    by Mia Kulper — February 10, 2014

  6. […] further reading: The Facts about Reverse Mortgages NY Times: Love Them or Love Them. Reverse Mortgages Have a Place MarketWatch: How Your Home Can Pay […]

    by » The Retirement Piggy Bank You Might Have Never Considered - Topretirements — October 6, 2014

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