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The leader in lower rates per HUD data.
The Housing & Urban Development (HUD) publishes average interest rate data to the public for each HECM lender.
Lower rates mean more $ for you.
Since interest rates are a primary factor in determining how much money you can receive, borrowers with the lowest rates will typically receive more proceeds and overall benefits of their reverse mortgage.
In addition, lower rates mean better performance of equity retention over the life of the loan. We encourage you to compare!
If you are new to reverse mortgages, start here!
What is a reverse mortgage?
A reverse mortgage is a loan secured by your home. It must be your primary residence (that means that you, as the borrower, must live in the home for as long as you have the loan).
This type of loan allows borrowers to access a portion of their equity — tax-free — without having to make monthly mortgage payments. No payment is required until the last surviving homeowner moves, dies, or sells the home.
The borrower maintains the title of the home and maintains responsibility for property taxes and homeowner’s insurance payments.
The amount borrowers receive is determined by the HUD calculations based on the age of the borrowers (most specifically the age of the youngest borrowing or non-borrowing spouse), the value of the home or the HUD lending limit, whichever is less and the interest rates in effect at the time.
Borrowers never have to make a monthly payment on reverse mortgage loans. There is never a prepayment penalty so they can make any payment they wish, including repaying the loan at any time, without penalty.
Since 1989, the Home Equity Conversion Mortgage (HECM) has been insured by the federal government through the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD).
Since its inception, the reverse mortgage program has helped thousands of homeowners just like you to safely access a portion of the equity in their homes to better enjoy their retirement years.
Is a reverse mortgage right for you?
Reverse Mortgage loans are not right for everyone, there’s also a downside to reverse mortgages. It may surprise you to hear a lender say this, but it is true. If you are looking for a short-term loan you may be better suited for a different type of financing.
A reverse mortgage loan can sometimes require closing costs and upfront mortgage insurance premiums which would make it impractical as a short-term solution in some cases. However, for those who wish to remain in their homes and need extra cash flow to do so, the Home Equity Conversion Mortgage may be exactly what you are looking for.
What are the requirements?
- At least one homeowner must be at least 62 years of age
- You must reside in the home as your primary residence
- Your home must be either a single-family home, two to four-unit owner-occupied home, townhouse, approved condominium unit, or certain manufactured homes
- You must attend an educational HUD-approved counseling session by phone or in person
- You must pass financial assessment guidelines and continue to pay future property charges such as property taxes and homeowners insurance
How much money can you get?
Generally, you can expect to receive 50-60% of your home value depending on your age, program selection and current interest rates.
The amount available is based on:
- Youngest borrower’s age
- Current interest rates
- 2022 HECM lending limit of $970,800, or up to $4,000,000 on jumbo loan programs.
Start with a personalized quote by ARLO™ – the only reverse mortgage calculator that offers eligibility, real-time rates, and advice to help you select the right program.
Types of payment options
There are several ways borrowers can receive loan proceeds—a choice that may depend on the reason you are getting a reverse mortgage or the strategy behind it.
Here are the payment options and some considerations:
1. Line of Credit
The line of credit is the most popular choice among borrowers for receiving their reverse mortgage funds.
Here are some considerations:
- You can access funds only when needed to help pay your living expenses if you so choose.
- If left untouched, the line of credit amount grows over time, which can be a way to maximize your borrowing potential.
- A line of credit can be extremely helpful for borrowers who do not necessarily need the funds right away but want to have it as a back-up.
2. Term and Tenure Payments
A term payment gives borrowers fixed payments for a specified amount of time. A tenure payment allows for monthly payments for the life of the loan, even if the payments exceed the home value.
Here are some considerations:
- Some borrowers use term payments to delay claiming Social Security benefits. Because Social Security benefits increase the longer you wait to begin receiving them, this is a strategy some borrowers use to maximize their loan.
- For example: If you are 65 and want to defer collecting Social Security until you turn 70 (to increase your Social Security payments), you can establish term payments to augment your income over that 5-year period. The amount you will receive each month in payments is fixed regardless of whether your home value decreases or increases over the next five years.
- Under a tenure payment plan, the only way the payments will stop is if you pass away or leave your home permanently (you need to be sure you always pay taxes and insurance when due so that you are not in default of your loan).
- With both term and tenure payment options, you also have the choice to do a modified term/line of credit plan or a modified tenure/line of credit plan. In both cases, the plans allow you to establish a line of credit and receive fixed monthly payments for either a specified amount of time or for your lifetime in your home.
3. Lump Sum Disbursement
- A lump sum may be beneficial for you if you have a large payment to make, such as
- Home renovations
- Medical payments
- Paying off a large current mortgage to eliminate monthly mortgage payments
- If you choose a fixed rate to take out the initial lump sum, you do have the option regarding how much of your home equity you want to tap into, up to your maximum benefit amount.
- For example, a borrower can take out less funds than he or she is qualified to borrow. Say you need some renovations done on your home and you know it will cost around $30,000 but are eligible for an $80,000 loan. You may choose to take the lesser amount in this case.
- The fixed rate loan is a single-draw loan. If you use less than your total proceeds or choose to repay a portion of the loan, you can never draw again from the loan. The only way to access additional funds at that point would be to refinance the loan with a new loan.
Reverse for home purchase
The reverse mortgage for home purchase allows for older Americans to retain more liquidity and an increased cash flow by not having to pay all cash or take on another mortgage payment when purchasing a retirement home.
Qualifications may be easier than traditional forward (or conventional) type financing.
- The qualification requirements for the typical purchase reverse mortgage loan is easier for senior borrowers due to underwriting standards. HECM for Purchase (H4P) loans do not utilize “income to debt ratios” for income qualification.
- The H4P offers an alternative to paying for the home in cash, while still being able to eliminate monthly mortgage payments.
- Much better for borrowers who might not qualify for traditional financing.
What are the current rates?
- Adjustable rates from 4.995% (1.875 Margin)
- Fixed Rate 5.81% (6.81% APR)
Rates as of Learn all about reverse mortgage interest rates and how they affect your available loan and future home equity position.
Required HUD approved counseling
Reverse mortgage counseling is required of all borrowers applying for a federally-insured HECM loan.
- Depending on your location, counseling may take place by phone or in person.
- The role of the counseling agency is to review your unique financial considerations and explore any alternatives that may be available, such as downsizing, city or state grants, or other alternatives.
- Counselors are required to ask potential borrowers about income, assets, debts, and monthly living expenses to perform a budget analysis.
- Once you have completed this session you will be provided a counseling certificate which you will need to sign and deliver to us as part of your loan application.
- Some states have further “cooling off” requirements that will not allow lenders to proceed for specified time periods after counseling has been completed with the third party. Check with us to see if your state has this requirement before committing to time constraints.
As a HUD approved lender, we must give you a list of no less than 10 counseling agencies to choose from, five of which are mandated by the FHA and include the National Council on Aging.
Only after we receive your application and signed counseling certificate can we begin the processing of your loan (and any other waiting periods as mandated by state laws).
How is a reverse mortgage repaid?
Reverse Mortgages require no monthly payments for as long as the borrower(s) lives in the home.
The loan becomes due and payable when the last borrower on the original loan permanently leaves the property whether because of death, they have permanently moved to an assisted living facility, to live with family for care or when the borrower sells the home.
At that time, the loan becomes due and payable and the loan must be repaid. There are several things that borrowers and heirs of reverse mortgage borrowers should do in anticipation of needing to finalize or pay off the loan.
We recommend you take these following steps:
- Procure title in the names of the heirs. This can include adding the names of heirs even before borrowers pass as your reverse mortgage allows you to add additional persons to title if at least one original borrower remains on title. There may be a probate required after borrowers pass so we recommend you seek professional counsel from an estate attorney in advance to determine the best method for your circumstances and state laws.
- Contact a local real estate professional to determine the most probable selling price of the home.
- Compare the value or most probable selling price to the outstanding balance of the loan.
- Decide if you want to refinance the loan or pay it off with other funds available to you or sell the property once you have all your information available. If there is equity in the home based on the value and most probable selling price you would just pay off the balance of the loan but remember, heirs also have the option to pay 95% of the home’s current value if the balance exceeds the value if you still want to keep the home.
The reverse mortgage is a non-recourse loan. If your heirs do not want to keep the property or sell it, they can simply let the lender take the property back and the lender’s only recourse is the property itself.
The lender cannot look to any other assets to repay the obligation so your heirs will owe nothing, even if the loan balance is higher than the property value.