Reverse Mortgage

A reverse mortgage can be a life-changing financial decision. You don't have to do this alone, and CCCS is here to guide you every step of the way.

Before you finalize a reverse mortgage, read and review the documents in the table below and complete a  required counseling session.

Call us at 866.616.3716 to schedule your counseling session with a certified reverse mortgage counselor and receive your required certificate. Once you have the required certificate, look for a lender to assist you with your reverse mortgage loan.

Reverse Mortgage Documents

Preparing for Your Counseling Session   Use Your Home to Stay at Home

HECM

A Home Equity Conversion Mortgage (HECM) is a loan that allows homeowners that are age 62 or older to convert their home's equity into available cash. A HECM is a reverse mortgage, which works much like a traditional mortgage, only in reverse. Reverse mortgages are "risingdebt, falling-equity" loans, because as debt increases, home equity falls. Rather than making a payment to the lender each month, the lender can send you a loan advance each month if you choose. Unlike a conventional home equity loan, a reverse mortgage does not require any repayment of principal, interest or servicing fees as long as you live in your home. You may use the cash you obtain from a reverse mortgage for any purpose.

Homeownership

Through a HECM, you remain the owner of your home. As with any home, you must continue to pay property taxes and homeowner's insurance. Alternatively, you can arrange for the lender to pay your taxes and insurance and deduct this amount from your reverse mortgage loan proceeds). You will also be responsible for maintaining your home and making necessary repairs.

Debt payoff

A HECM must be a first mortgage. If you have an existing mortgage, it must be paid off prior to closing or paid off at closing with funds you receive from the HECM. Any additional lien against your property must be subordinate to the HECM.

Principal Limit

The amount of money you may be eligible to borrow depends on your age, home value, and the interest rate. Typically, the older you are, the more cash you will be able to receive. Also, the greater the home value or the lower the interest rate, the more cash you will be able to receive.

Loan costs

HECMs typically involve four types of costs: an origination fee, closing and other third party costs, servicing fees, and the mortgage insurance premium. You may finance these costs as part of your loan by having them added to the loan balance. Your lender must provide you with a Total Annual Loan Cost (TALC) disclosure for any loans that you are considering prior to your loan closing.

Interest rates

Interest is charged on all money that you receive and on all loan costs that have been financed, i.e., added to the loan balance. You may select an interest rate that is fixed or that adjusts monthly or annually although all lenders do not offer all options. Your lender must provide you with the index, the margin, and the periodic and lifetime caps for adjustable interest rates.

Payment plans

You may receive the cash from a HECM in a variety of ways. You can receive the money as a line of credit or through fixed monthly payments for as long as you live in the home or for a shorter specified period of time. Through a line of credit, you may choose to receive the cash all at one time as a single draw on the loan. You may also choose to receive cash through a line of credit or a combination of the different options.

Reverse mortgage loan advances are not taxable and generally do not affect Social Security or Medicare benefits. However, you must be careful that any loan proceeds you retain do not exceed the monthly liquid resource limits for Supplemental Security Income (SSI) and Medicaid.

You have the option of changing your payment plan type at any time for a fee not to exceed $20.00. You should ask your lender about the procedures for changing your payment plan in the future.

Cancellation

After closing a HECM, you, as the borrower, have 3 days to cancel the mortgage if you choose. This is also known as the "rescission period", an important measure implemented to protect the consumer.

Repayment

HECMs do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves from the home. You may partially or fully repay the loan balance at any time. There are no prepayment penalties for a HECM.

Some products allow open-end credit: you may pay back some or the entire loan and then reborrow the money at another time (a line of credit). Other products have closed-end credit, meaning that you may not re-borrow principal that is paid on the loan.

Reverse Mortgage Loan Payoff

When the loan becomes due and payable, you or your estate must pay back all of the cash advances, any fees or costs financed as part of the loan, and all interest that has been charged to date. The loan becomes due and payable when the last surviving borrower passes away; the property is no longer the primary residence of the borrower; the last surviving borrower has been unable to occupy the home for more than 12 consecutive months; the borrower sells or otherwise transfers ownership of the property; or the borrower fails to perform an obligation under the mortgage.

If your home is sold to pay off the loan, you or your estate will not have to pay back more than the amount received from the sale of the home. However, if your heirs or your estate choose to keep the home, they must pay the entire loan balance even if it is greater than the value of the home. This may occur if the home's value depreciates, if interest rates go up, or if the total payments made during the life of the loan exceed the value of the home.

To schedule a reverse mortgage counseling session

866.616.3716

CredAbilityU Your free resource to Explore, Learn and Grow.

Visit www.CredAbilityU.org to learn your way out of difficult times.