Frequently Asked Questions About Reverse Mortgages

Later in your life, or as your parents age, you may hear more and more about how reverse mortgages can provide financial security, allowing you to benefit from the equity of your home. These financing tools may sound too good to be true, especially if you are not very familiar with them. Here, we will clear up some of the most common questions surrounding reverse mortgages.


What Is a Reverse Mortgage?

Let’s start with the basics. Like a regular mortgage, a reverse mortgage is a type of home loan. It is often referred to as an HECM, which stands for a Home Equity Conversion Mortgage.


As you make mortgage payments year after year, you build equity. An HECM allows you to turn this equity into cash, allowing you to cover larger expenses. The loan does not have to be repaid until the home is no longer the borrower’s primary residence, or until the borrower is no longer able to make the mortgage payments.


Who Qualifies for a Reverse Mortgage?


According to the Department of Housing and Urban Development, you can qualify for an FHA loan if you:


  • Own your home outright
  • Are 62 years old or older and own your own home
  • You have a low mortgage that could be paid off using the HECM


Other stipulations include that you must be able to financially cover ongoing property expenses, and the home must be your primary residence. The FHA also requires you to speak with an HECM counselor before receiving the loan.


How Much Can I Receive from an HECM Loan?


There are many different factors that can affect the amount you can borrow using an HECM. In Jacksonville, you will need to have a certified Jacksonville appraiser assess the current market value of your home. The FHA will use either this value or their limit of $625,500; they will choose the lesser value of the two. Other factors that will affect the amount include current interest rates, your initial premium rate, and the age of the youngest borrower.


Will I Still Have an Estate My Children Can Inherit?


When the home is no longer your primary residence, or is sold, all HECM charges, including interest, must be repaid. All remaining proceeds from the property, after this balance is repaid, can then be returned to you or distributed to your heirs. By taking out a reverse mortgage, there is no risk that debt will be transferred to heirs.