Some seniors are skeptical of reverse mortgages. They worry that they are tools of dishonest lenders who hope to steal the title of their homes and rob them of years of faithful monthly home payments.
But the reality surrounding reverse mortgages may surprise many seniors. Reverse mortgages have actually been around for over thirty years. In fact, some of the first federally backed reverse mortgages began in the late 70s and by 1980, the Federal Housing Authority began endorsing reverse mortgages. Later, in 1982, the U.S. Senate began hearings on the need for reverse mortgages, which later became a part of the U.S. Department of Housing and Urban Development (HUD).
Today, the Federal Housing Authority (FHA) administers HUD reverse mortgages. The FHA’s latest reverse mortgage is called the Home Equity Conversion Mortgage (HECM) and is becoming very popular with seniors. This program allows seniors to withdraw some of their home’s equity to help with financial security. Seniors can use the monthly payments for healthcare, daily living expenses or other necessities.
The HECM requires that seniors be 62 years or older and that their home be paid off or have a very low balance that can be paid off with the remaining equity in the home. The home must be the senior’s primary residence. The lender will not own the home, and no payments will be made on the home as long as the senior or the other borrower lives in the home.
Seniors can also consult with a reverse mortgage counselor. The FHE provides HECM counselors and can be consulted before applying for a loan at (800) 569-4287. AARP can also help provide information about reverse mortgages and refer seniors to a reverse mortgage counselor. The counselor can help seniors complete the reverse mortgage application and recommend reverse mortgage lenders. The FHA offers a free list of approved reverse mortgage lenders online.
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