A Reverse mortgage is a loan that is available to seniors over the age of 62 which allows them to convert the equity in their home into cash. These loans were developed to give seniors access to much needed cash for expenses such as:
- Monthly living expenses
- Home repairs and remodeling
- Medical bills and various medical expenses
- Paying off outstanding debt
- Eliminating current mortgage payments
- Purchasing a new home (downsizing, relocating, etc.)
- and more…
This type of loan is called a reverse mortgage because instead of the borrower making monthly payments to their lender, the lender makes the payments to the borrower. Unlike a more traditional home equity loan or second mortgage, a reverse mortgage does not have to be repaid until the borrower no longer occupies the home as their primary residence.
Covenant Reverse Mortgage, LLC works directly with local institutions to help our clients find the best rates available on reverse mortgages. Our team has the knowledge and expertise to educate local Idaho seniors on the reverse mortgage process and requirements. Whether you are located in Boise, Caldwell, and Coeur d’Alene, we are your source of reverse mortgage resources and information.
Two Most Common Types of Reverse Mortgages
Home Equity Conversion Mortgage (HECM)
There are two common types of reverse mortgages. The first is a Home Equity Conversion Mortgage (HECM). A HECM is a reverse mortgage insured by the Federal Housing Administration (FHA), much like the traditional FHA loan. This is the only type of reverse mortgage insured by the Federal Government and currently makes up the vast majority of reverse mortgages in the United States. As of January 1, 2022, the Federal Housing Administration’s (FHA) lending limit for Home Equity Conversion Mortgages (HECM) is $970,800.
To qualify, a HECM Borrower must:
- Be at least 62 years of age
- Own their property outright or have a low mortgage balance
- Occupy the home as their primary residence
- Not be delinquent on any federal debt
- Have the ability to pay ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.
- Participate in a reverse mortgage information session given by an HECM counselor approved by the U.S. Department of Housing and Urban Development (HUD).
A borrower’s income, expenses, and credit history will also be reviewed and verified by the lender. The borrower’s property must also meet all of the FHA’s property standards and flood requirements.
HECM borrowers can choose from a variety of different payment plans depending on their individual needs.
Fixed Rate Mortgages:
- Single disbursement lump sum payment
Adjustable Rate Mortgages:
- Line of Credit
- Term – equal monthly payments for a set number of months
- Tenure – equal monthly payments as long as one borrower occupies the property
- Modified Tenure – line of credit and tenure combination
- Modified Term – line of credit and term combination
HECM loans can also be used for the purchase of a home. For more information on HECM for Purchase, click here.
Proprietary Reverse Mortgage
Proprietary reverse mortgages are far less common than HECM loans. These types of reverse mortgages are not insured by the federal government, rather they are insured privately by the mortgage companies that offer them. The regulations that HECM loans must adhere to do not apply to the proprietary loan, although most lenders will follow the same standards as best practice. Proprietary reverse mortgages are often referred to as jumbo reverse mortgages because they are frequently taken on high-value homes.
Whether you are looking for a HECM or proprietary reverse mortgage, the team at Covenant Reverse Mortgage, LLC is committed to finding you a great rate on a loan that meets your unique needs. The reverse mortgage process can be a complicated one. Our goal is to educate our borrowers throughout the entire loan process so that they are informed throughout the entire borrowing process. Contact us today for any reverse mortgage questions you may have!