Home Buying in 79912>Question Details

Andy Truett, Real Estate Pro in El Paso, TX

How does a reverse mortgage work?

Asked by Andy Truett, El Paso, TX Fri Jun 20, 2014

I have a friend in need of this special type of help.

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A reverse mortgage can be a blessing or a curse! It is important for seniors to understand exactly how this loan product works. Essentially a reverse mortgage is for those who are over 62 years of age and have significant equity in their home. A reverse mortgage allows you to tap the equity in your home in the form of payments that come to you. Instead of having a monthly payment like a traditional mortgage, the lender actually pays you and you remain living in the home. Each month your equity potentially decreases. It is important to understand the pros and cons of this type of loan. Take a look at the detailed web reference below explaining exactly how a reverse mortgage works.
0 votes Thank Flag Link Mon Apr 18, 2016
A reverse mortgage is a home loan that provides cash payments based on home equity. Homeowners normally "defer payment of the loan until they die, sell, or move out of the home.

Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program, which enables you to withdraw some of the equity in your home

Here is a link for FAQ about reverse mortgages.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou…
0 votes Thank Flag Link Fri Jun 20, 2014
Hi Andy,

The basics... If you're 62 and older and enough equity in your home, you can get a cash out loan secured against your home. This loan must be the only mortgage on the property. Therefore, if there is an existing mortgage, it must be paid off with some of the proceeds from the reverse mortgage.

There's no credit or debt-to-income guidelines. You do not have to make payments on the mortgage and repayment is deferred until you are no longer living in the home.

When the borrower is no longer living in the home, the loan must be paid in full, including interest and financed closing costs.

The good news is with a reverse mortgage you will NEVER OWE MORE THAN YOUR HOME'S VALUE at the time the loan is repaid.

Borrowers do continue to own their homes and are required to pay your property taxes, insurance and maintain the home with needed repairs. Failure to carry out these responsibilities may be grounds for the loan to become due and payable in full.

As the home appreciates and the borrower grows older they may qualify for more money, and the reverse mortgage may be refinanced to borrow more against the increased equity.

Best regards,



Elva A. Wormley
Mortgage Consultant
Office: (408) 615-8500
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981
0 votes Thank Flag Link Fri Jun 20, 2014
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