What is a reverse mortgage, and how does it work?
A reverse mortgage is a loan designed for homeowners aged 55 or older that allows them to access the equity in their home without selling it. Instead of making monthly payments to the lender, the loan balance increases over time, and repayment is deferred until the homeowner moves out, sells the home, or passes away.
Who qualifies for a reverse mortgage?
Homeowners aged 55 or older, with significant equity in their homes, may qualify. The property must be their primary residence and meet FHA requirements. Credit and income evaluations are generally more lenient compared to traditional loans.
How is a reverse mortgage different from a traditional mortgage?
With a traditional mortgage, you make monthly payments to the lender. With a reverse mortgage, the lender pays you, either in a lump sum, monthly payments, or a line of credit. There are no monthly payments required for a reverse mortgage, but you do remain responsible to pay your property taxes and homeowner’s insurance.
What types of reverse mortgages are available?
There are three main types of reverse mortgages:
- Home Equity Conversion Mortgages (HECMs): These are FHA-insured reverse mortgages and the most common type, with strict guidelines for borrower protection. South River Mortgage offers the HECM program.
- Proprietary Reverse Mortgages: These are private loans offered by companies like South River Mortgage, designed for higher-value homes or borrowers aged 55 and older. Our proprietary HomeForLife product falls into this category.
- Single-Purpose Reverse Mortgages: Offered by some state and local government agencies, these loans are for specific purposes like home repairs or property taxes and are not widely available. South River Mortgage does not offer single-purpose reverse mortgages at this time.
What are the age requirements for a reverse mortgage?
For FHA-insured Home Equity Conversion Mortgages (HECMs), homeowners must be at least 62 years old. Proprietary reverse mortgage products, like our HomeForLife loan, may have a minimum age requirement of 55 depending on your state.
Does my home need to be paid off to qualify?
No, but you must have sufficient equity in your home. Any existing mortgage balance will be automatically paid off with the reverse mortgage proceeds.
Are there specific types of homes that qualify for a reverse mortgage?
Yes, eligible properties include single-family homes, multi-family homes (up to four units, with one unit occupied by the borrower), and FHA-approved condominiums.
How much money can I receive with a reverse mortgage?
The amount depends on your age, the home’s value, the interest rate, and the type of reverse mortgage. Older homeowners with higher equity may qualify for more.
To get a free estimate, use our free reverse mortgage calculator by clicking the link below:
Do I still own my home with a reverse mortgage?
Yes, you retain ownership of your home. The reverse mortgage is simply a lien against the property.
What happens to my reverse mortgage if I sell my home or move out?
The loan becomes due when you sell your home, move out permanently, or pass away. The proceeds from the sale are used to pay off the loan, and any remaining equity belongs to you or your heirs.
Are there monthly payments required with a reverse mortgage?
No monthly payments are required. You are only responsible for maintaining the home, paying property taxes, and homeowners insurance.
What are the costs associated with a reverse mortgage?
Costs may include an origination fee, mortgage insurance premiums, and customary closing costs. All fees are disclosed upfront and can typically be financed into the loan.
How are reverse mortgage interest rates determined?
Rates are based on market conditions and can vary depending on whether you choose a fixed or adjustable-rate loan.
When does a reverse mortgage need to be repaid?
A reverse mortgage needs to be repaid when you move out, sell the home, or pass away. You or your heirs can either sell the home or refinance to pay off the loan.
What happens to my reverse mortgage after I pass away?
Your heirs can choose to repay the loan and keep the home, sell the home to pay off the loan, or allow the lender to sell the home. Any remaining equity belongs to your heirs.
Will my heirs be responsible for the reverse mortgage debt?
No, reverse mortgages are non-recourse loans. If the loan balance exceeds the home’s value, your heirs are not responsible for the difference.
What are the main benefits of a reverse mortgage?
- No monthly mortgage payments required.
- Access to tax-free cash from your home equity.
- Flexibility to receive funds as a lump sum, monthly payments, or line of credit.
Are there risks or downsides to getting a reverse mortgage?
Just like anything in life, there are certain risks that reverse mortgages can pose. These are some items that you may wish to discuss with your HUD-approved housing counselor when making the decision to obtain a reverse mortgage. The loan balance increases over time, reducing your home equity. Borrowers must also stay current on property taxes, insurance, and maintenance.
Why choose South River Mortgage for my reverse mortgage needs?
We are a HUD-approved FHA mortgage lender and the fourth largest reverse mortgage lender in the U.S. Our proprietary HomeForLife product offers unique benefits like speed of closing and customized options for your needs.
How long does the loan process take with South River Mortgage?
On average, we close loans in just 26 days after receiving the home appraisal—much faster than the industry standard.
What makes South River Mortgage different from other lenders?
We make use of technology to help homeowners close their loans faster—without annoying phone menus or impersonal service. Our personalized service and fast turnaround times ensure you get the financial solution you need without unnecessary delays. It’s the reason we have a 4.5-star rating on Google.
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