A reverse mortgage provides tax-free income for people who are at least age 62

and own at least 35% equity in their home. You’ll never make a payment. Use the money for a grandchild’s education, dream vacation, long-term care plan or whatever you choose.

What is a reverse mortgage?

A reverse mortgage is a low-interest loan for senior homeowners that uses their home's equity as collateral. Borrowers retain title to their property. The loan is repaid after the last surviving homeowner permanently moves out or passes away. Then the estate has about 12 months to repay the balance, perhaps by selling the home. Any remaining equity belongs to the estate. Perhaps best of all, the estate is not liable if the home sells for less than the balance of the reverse mortgage.

What are the advantages?

• Provides steady, lump-sum, or line-of-credit income
• No income or credit requirements
• Not repaid until after your death or you permanently move out
• Flexible: use for anything from living expenses to a grandchild’s education

Who is eligible?

For the most common kind of reverse mortgage, the Federal Housing Administration (FHA) requires that homeowners:

• Be at least age 62,
• And live in the home as your primary residence,
• And own your home free and clear, OR have a mortgage balance no more than about 65% of the home's value. (Why? Because 65% is considered a “small mortgage balance” that makes it more feasible to meet the borrower’s needs.)

If there is a mortgage balance, you must pay it off completely with the proceeds of the reverse mortgage loan at closing.

Which kinds of homes qualify?

Almost all home types are eligible.

Manufactured homes must:

• Be built in the last 30 years,
• And be on a permanent foundation, following FHA (Federal Housing Administration) requirements,
• And meet an FHA inspection,
• And the land must be owned and property taxed as “real property,” including the manufactured home unit. (Title eliminated.)

How much can my loan be?

The amount available depends on three factors:

• age of the youngest homeowner (older is better)
• current interest rate
• appraised value of the home

Our mortgage advisors can provide an estimate with no obligation.

How will a reverse mortgage pay me?

Choose one or more of these payment types to fit your needs.

• Lump sum – receive all the cash at closing
• Tenure - equal monthly payments as long as you live in your home
• Term - equal monthly payments for a fixed number of years
• Line of Credit - draw any amount at any time, up to the line of credit’s limit

Home equity loan vs. reverse mortgage: what’s the difference?

What if I outlive my reverse mortgage?

A reverse mortgage is designed so it can not be outlived. As long as at least one homeowner lives in the home – keeping up with taxes and insurance – you don’t need to repay the loan. Another benefit: you will never owe more than your home's value (become "upside down") because the FHA insures the loan.

How does a reverse mortgage affect my estate?

When the surviving homeowner permanently moves out or passes away, the estate has two choices:

• Keep the home by converting the reverse mortgage into a traditional mortgage
• Sell the home to pay the balance of the reverse mortgage

Protecting your estate’s value

If the home’s equity is more than the loan balance, all remaining equity belongs to the estate. If the home’s sale price is less than the loan’s balance, the FHA usually helps the lender cover the loss. No other assets are affected by what you owe on a reverse mortgage, so valuable items like investments, second homes and cars cannot be taken to pay off the reverse mortgage.