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Document Contents
- The Program
- Eligible Homeowners
- Property Qualifications
- Frequently Asked Questions
- Information Resources
The Program
The home equity conversion reverse mortgage is a Federal Housing Administration (FHA) insured program for house rich and cash poor older homeowners. It allows qualified seniors to draw against their home's equity and delay repaying the loan balance until they sell, leave or transfer title to the property.
Eligible Homeowners
The program is designed for homeowners who are at least 62 years of age or older. In the case of jointly held property, both husband and wife must be at least 62 years old. The older the homeowner, the more liberal the program is at releasing home equity. Most users are, therefore, in their 70s or older.
Property Qualifications
Homes must be designed as single family properties and must be the principal place of residence for the owners. Condominiums and farm homes may also qualify.
Frequently Asked Questions
1) How can I qualify for a Reverse Mortgage Loan?
Unlike other types of loans, qualification for a reverse mortgage is based on the value of your property, not your income. Even homeowners with a poor credit history may qualify.
2) How is a Reverse Mortgage different from a Home Equity Loan?
With a bank home equity loan, some repayment is due every month. In a reverse mortgage, repayment is not due until the homeowner sells or leaves the property.
3) How can I withdraw my equity?
You may select from several withdrawal plans:
- monthly payouts until leaving the home;
- monthly payouts for a specified amount of time;
- a line of credit for withdrawing amounts as needed;
- a combination of a line of credit with a monthly payout.
4) Are there restrictions on how I spend my equity?
No. You may spend your home equity to meet any of your needs. Some typical uses are to cover taxes and insurance, health care, monthly needs, home improvement work, purchasing a car, etc.
5) Does the lender get the house?
No. You keep title to the property.
6) Who pays the property taxes and insurance?
In most cases, you will continue to pay the taxes and insurance, as well as maintain your home.
7) How much can I get?
Your age or your spouse's age (if they are younger), your home's equity (your home's value, less any debt) and the interest rate will determine how much you can receive.
In cases where your home value exceeds the maximum insurable FHA limit, the following amounts are used to figure your payouts:
St. Croix/Pierce Counties $116,850 Dane County $112,900 Milwaukee, Ozaukee, Washington Counties $109,250 Waukesha County $133,000 Brown/Sheboygan Counties $90,250 Racine County $99,400 Kenosha County $118,750 Calumet, Outagamie, Winnebago Counties $90,050 LaCrosse County $87,400 Chippewa, Eau Claire Counties $81,548 Douglas County $81,548 "Incorporated areas" $81,548 For example, your monthly payouts for as long as you live in your home at a 9% interest rate would be more if you are older or if your home's equity is greater.
If your home equity is ...
$67,500 $92,250 AGE MONTHLY
PAYOUTMONTHLY
PAYOUT70 $203 $277 75 $253 $345 80 $320 $439 85 $417 $570 8) How is my home's value established?
Your home's value is determined by an FHA appraiser after you apply for a loan.
9) What are the fees or charges?
Charges include:
- mortgage closing costs of 4-5% of the home's value or FHA maximum limit;
- adjustable interest rates tied to the one-year Treasury rate;
- a small annual FHA mortgage insurance premium; and
- a monthly lender servicing fee.
These costs may all be charged against your home's equity.
10) What if I want to sell my home?
You may sell your home at any time with no penalty. At that time, the mortgage would be paid off and you would keep the remaining equity.
11) When do I repay my loan?
The loan is due when you leave or sell your home, or transfer the title. If you have a spouse who is also a title holder, the loan is not due until you both have left the home.
12) What if I leave my home temporarily?
The program continues as long as you return within 12 months.
13) What if I already have a mortgage?
In order to use the program, a sufficient amount of home equity must be available under the reverse mortgage to cover the existing debt.
14) What if my house needs repairs?
You may qualify for public financing for needed repairs. If not, some of your home equity must be withheld to cover the cost of the required improvements.
15) What happens if my loan balance is bigger than the house value?
It is possible that the debt against your home may get larger than the home's value. However, the lender's ONLY claim is against the home. This is called a "non-recourse loan."
16) What if the lender does not make scheduled payouts to me?
The FHA will make payouts to you in the event the lender fails to do so.
17) Will this loan affect my Social Security, Medicare or retirement pension?
No. There is no effect on Social Security, Medicare or pensions.
18) What if I'm currently receiving some public benefits like Supplemental Security Income (SSI), Medical Assistance (also known as Title 19, MA or Medicaid), food stamps or property tax deferral?
Your eligibility for these benefits will be affected only if your assets exceed the limits at the end of the month. It is important to discuss this issue with your county's benefit specialist or FHA trained housing counselor.
19) Why do I need a counselor before applying?
The FHA requires an appointment with a trained housing counselor before you may apply to a lender. The counselor will explain the home equity conversion mortgage program, help you evaluate your financial needs and provide information on other programs that may meet your needs.
20) Where do I go from here?
The FHA requires counseling before a homeowner may apply to a lender for a home equity conversion reverse mortgage. There are a number of counselors you may contact in addition to lenders.
Information Resources
The Coalition of Wisconsin Aging Groups, a statewide advocacy organization for older people, can provide further details on the Home Equity Reverse Mortgage Program.
For more information, or to obtain a list of mortgage counselors, complete the electronic form below:
Or ... print the form, fill it out by hand and "snail" mail it to CWAG.
This document was made possible by a grant from the State of Wisconsin Division of Housing and was adapted, with permission, from:
Senior Housing, Inc.
1885 University Avenue
St. Paul, MN 55104Last updated: August 22, 1997
By: Gail Schwersenska