Reverse Mortgage Info

There are a lot of misconceptions regarding reverse mortgages. A reverse mortgage is also known as HECM, which stands for 'Home Equity Conversion Mortgage'. A reverse mortgage basically allows you to access your home equity by receiving a lump sum or monthly payments. Some lenders also allow a line of credit to be open in a reverse mortgage.

What Does a Reverse Mortgage Cost?

Most reverse mortgage will cost you nothing out of pocket if you choose to roll the closing costs into the loan. The obviously exception would be the HECM Purchase, a special type of reverse mortgage where one can use a reverse mortgage to purchase a home. The actual types of fees of a reverse mortgage is similar to a traditional forward mortgage. There is an origination charge, title insurance, mortgage insurance among other smaller fees. The actual costs of each of these items will vary depending on the product and lender you are working with. A ballpark figure one can use is to expect anywhere from 3-8% of the loan balance in fees.

Reverse Mortgage Qualifications

The beauty of a reverse mortgage is since you are not making any monthly payments, there is no income qualification required or credit check required. The government have been pushing to start requiring credit checks to decrease the foreclosure for reverse mortgages. At this time, there is no such requirement in place. Requirements of a reverse mortgage include:
  • Age 62+ - Youngest borrower must be at least 62 or older.
  • Primary Residence - The borrower must occupy at least one unit of the property as a primary residence
  • Property Types - Single family, duplex/fourplex, some condos, some manufacturered homes
  • Complete Counseling Session - All borrowers must complete a HECM approved counseling session discussing the benefits and drawbacks of a reverse mortgage. Most states allow the sessions to be completed via telephone.
A reverse mortgage may not be right for everyone, but can be a great financial tool for those in need of cash. For those that can qualify for a traditional mortgage or have the option of selling their property and downsizing while using the cash proceeds, a reverse mortgage may not be the best option.
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