MEETING YOUR REAL ESTATE NEEDS
How HUD's Reverse Mortgage Program Works
Homeowners 62 and older who have paid off their mortgages or have only moderate mortgage balances remaining are eligible to participate in HUD's reverse mortgage program. The program allows homeowners to borrow against the equity in their homes.
Homeowners can receive funding in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Homeowners whose circumstances change can restructure their payment options.
Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the borrower lives in the home. Lenders recover their principal, plus interest if the home is ever sold or if no original borrower remains in the home. The remaining value of the home goes to the homeowner or to his or her survivors. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall without looking to the homeowner or his/her estate for the balance. The Federal Housing Administration, which is part of HUD, collects an insurance premium from the loan proceeds to provide this coverage.
The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed. For example, based on a loan at today's interest rates, a 65-year-old could borrow approximately 55 percent of the home's value, a 75-year-old could borrow approximately 60 percent of the home's value, and an 80-year-old could borrow approximately 65 percent of the home's value.
There are no asset or income limitations on borrower's receiving HUD's reverse mortgages. There are also no limits on the value of homes qualifying for a HUD reverse mortgage. However, the home's value for calculation purposes is capped by the maximum FHA mortgage limit, which is currently $417,000. You may borrow a percentage of your home's vlaue, subject to these limitations.
HUD's reverse mortgage insurance makes the FHA program much more beneficial to borrowers than the smaller reverse mortgage programs run by private lenders without FHA insurance. And, FHA's mortgage insurance asures you that you and your estate can never be held responsible for more debt than your home is worth if and when the loan is repaid. No prepayment is ever required as long as you or your spouse live in your home.
Principal residence, single family homes, duplexes and condominiums qualify for this program, as do manufactured homes, provided they are on your own land and were built after June 1976. In most cases, if the home is in need of repairs or remodeling, you can use the proceeds of this loan to pay the cost of the repairs. If repairs are required for financing, those repairs can usually take place after the loan closes.
These loans provide a great long term solution for retirement funding and can be used to eliminate and existing mortgage and it's monthly payment, provide a regular income suppplement or a source of ready cash, The borrower can combine payment plans and make changes at any time.
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