How Does a Reverse Mortgage Work?
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What is a reverse mortgage?
A reverse mortgage is a type of home loan that allows seniors to convert the equity in their home to cash to meet a wide range of financial needs. Currently the primary product on the reverse mortgage market is the Home Equity Conversion Mortgage (HECM). A HECM is a product insured by the Federal Housing Administration (FHA).
Can I apply?
Basic eligibility requirements to apply for a HECM loan include:
- Be age 62 or older
- Occupy the home as the primary residence
- Own the home (existing mortgage must be paid off before or at closing)
- Live in an eligible property
How can this program help me?
Reverse mortgage is one of the long-term solutions to help you stay at home. With a reverse mortgage:
- The borrower retains the title of the home
- The borrower will never owe more than the value of the home if he/she sells the property to repay the loan, even if the value of the home decreases
- A reverse mortgage can be used to pay debts, supplement income, or as extra funds for medications, long-term care, home modifications, emergencies, etc.
What is reverse mortgage counseling?
- Any older homeowner considering a reverse mortgage must first meet with a government-approved reverse mortgage counselor before their loan application can be processed.
- Reverse mortgage counselors provide unbiased, third party education to seniors. During counseling sessions, counselors must follow a federally mandated protocol, which lasts between one to two hours.
- The counseling sessions must cover: basics about the reverse mortgage loan, costs and fees, alternatives, access to benefits, options for receiving the funds, etc.
How do I get help?
NCOA has partnered with GreenPath Financial Wellness–a nonprofit financial wellness organization approved by the U.S. Department of Housing & Urban Development (HUD) to do housing counseling–to offer reverse mortgage counseling to older homeowners.
Reverse Mortgage Counseling
Older homeowners considering a reverse mortgage can get one-on-one counseling through a partnership between NCOA and GreenPath Financial Wellness. Counseling sessions last between one to two hours and follow a federally mandated protocol. The counselors can also assist clients with screening for benefits and finding local community services. To schedule a reverse mortgage counseling session with NCOA/GreenPath, call toll-free 855-899-3778. To find a local HUD-approved counselor, visit HUD’s website at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm.
Use Your Home to Stay at Home™
Use Your Home to Stay at Home™ is the official reverse mortgage consumer booklet approved by HUD and given to seniors prior to counseling sessions. This booklet will help you understand the benefits and challenges of this funding option of using the equity in your home, and know where to go for more information.