A Reverse Mortgage is a home equity loan available only to those that are 62 and
above. It provides a portion of your home equity as tax free income to payoff an
existing mortgage, or enjoy a better retirement and lifestyle. There is never a monthly
mortgage payment required! You are still the owner of your home.
Although qualifications do apply, this loan is still considerably less difficult
than a traditional Home Equity Loan.
FHA insures fixed interest rate reverse mortgages, as well as annual and monthly
adjustable interest rate reverse mortgages. Borrowers have the ability to change
the way they receive payments from their HECM at any time provided funds are available.
Fixed interest rate reverse mortgages are limited to a Single Disbursement Lump Sum
Payment option where there is a single, full draw at loan closing and the mortgage
does not provide for future draws by the borrower under any circumstances. Adjustable
interest rate reverse mortgages provide for five, flexible payment options, all allow
for future draws of available funds. The amount of funds available to the borrower
is currently determined by the age of the youngest borrower (or Non-Borrowing spouse
for FHA case numbers assigned after August 4, 2014). The disbursement of mortgage
proceeds during the first twelve-month disbursement period is subject to an initial
disbursement limit as determined by requirements set by the Secretary of HUD in Mortgagee
Letter 2013-27. The borrower has the statutory right to select his or her interest
rate (fixed or adjustable) at the time the mortgage is originated. For borrowers
who select an adjustable interest rate loan, the borrower has the ability to change
payment plans at any time throughout the life of the loan, provided funds are available
to be withdrawn. The borrower has the right to determine what amount, if any, to
draw from the loan, over and above what is necessary for the payment of mandatory
obligations and subject to the draw limits. This brochure was not created by HUD
or FHA and has not been approved by HUD or any government agency.