Reverse Mortgages

Learn About Reverse Mortgages

What is a reverse mortgage?

A home equity conversion mortgage (HECM), more commonly known as a reverse mortgage, lets homeowners 62 years of age and older tap into the home equity they’ve grown over the years. The HECM reverse mortgage program is not a government benefit. A reverse mortgage is a loan that you’ll have to pay back according to the program terms. Your reverse mortgage monthly payout will vary based on the loan terms you choose.

Frequently Asked Questions

What are the basics of a HECM/reverse mortgage?

Allows you to secure a portion of your home equity as tax-free funds*
Does not require monthly mortgage payments**
Insured by the Federal Housing Administration (FHA)***
Can also be used to buy a new home using equity from the sale of your previous home

*Always consult a financial advisor and an appropriate government agency for guidance on how taxes or government benefits may be affected. **Requires you to live in the home as your primary residence, pay property taxes and homeowners insurance, and maintain the home according to FHA’s guidelines. ***Cornerstone Home Lending is not affiliated with the U.S. government, nor has this information been approved by a government housing agency.

How do I know if I qualify?

You must live in your home as your primary residence
You need to be paid up on property taxes and homeowner’s insurance
You have to keep up with your home maintenance
At least one borrower on the reverse mortgage loan must be 62 or older
You must meet HUD’s financial eligibility guidelines

HECM borrowers are also required to receive counseling from an HUD-approved counseling agency. The National Council on Aging recommends that borrowers talk with an HUD counselor before meeting with a lender for objective information.

What are the benefits?

Live in your home and keep the title for it.
Use the funds from a reverse mortgage to pay off your existing mortgage.
You’re no longer required to pay monthly principal and interest payments on a reverse mortgage – but you’re still required to pay for real estate taxes, homeowners insurance, and home maintenance.
You may not have to pay taxes on your monthly payout. Reverse mortgage proceeds are typically not considered taxable income – check with a tax advisor for guidance.
Because a reverse mortgage is a non-recourse loan, you and your heirs are not personally liable for any amount of the mortgage that surpasses your home’s value.
After the reverse mortgage is repaid, you or your heirs get to keep any remaining equity.

Are there restrictions on how the funds are used?

No! Depending on your personal financial situation, the possibilities could be endless. You could use funds from a reverse mortgage to:

Supplement income
Cover healthcare or emergency expenses
Pay for home renovations
Pay off high-interest debt
Buy a new home

How do you get the reverse mortgage payout?

Depending on whether your HECM is fixed-rate or adjustable, you could receive your funds as:

A lump sum. You’ll get the entire loan proceeds upfront.
A line of credit. You’ll draw on your loan when and for how much you choose.
A monthly tenure.. You’ll get a monthly payout from your lender for as long as you live in the home.
A monthly term.. Similar to the tenure option, you’ll get a monthly payout for a set number of years that you choose; generally, a term payout is larger than a tenure.
A combination.. You’ll combine a line of credit with either a monthly tenure or a monthly term.

What are the drawbacks?

Mortgages aren’t one-size-fits-all – and that’s especially true for a reverse mortgage. Speaking with an HUD counselor and reputable reverse mortgage lender like Team Coughenour can help you to feel confident in your decision.

Your loan fees might be higher than those on a traditional mortgage.
Medicaid, Social Security, Medicare, and other government benefits programs could be affected.
You might leave fewer assets and equity to your heirs. A home with a reverse mortgage may be left to your heirs, but the reverse mortgage loan balance must be paid back.

Debunking Reverse Mortgage Myths

Getting a home equity conversion mortgage (HECM) doesn’t have to be complicated. Team Coughenour offers personalized guidance and trusted service to walk you through the process. We also want to clear up common misconceptions about the program so you have all the facts.

Myth #1: When you get a HECM reverse mortgage, you give up the title on your home.
Fact: You retain title, ownership, and appreciation of your home — not the lender.

Myth #2: You could be forced to move or sell your home.
Fact: As long as you comply with HECM loan terms, you do not have to move or sell your home.

Myth #3: To qualify for a HECM, you must be debt-free.
Fact: You do not have to own your home free and clear to qualify for a HECM.

Myth #4: Your heirs are responsible for the debt from a HECM.
Fact: Heirs do not incur debt from a HECM. A HECM is a non-recourse loan. So borrowers never owe more than their home’s value at the time of repayment. The lender cannot use other assets to satisfy repayment.

Is a reverse mortgage right for you?

Reverse mortgages have specific requirements and can be difficult to understand. That’s why working with a reputable lender is so important — to avoid any potential scams or fraudulent activity. As a local reverse mortgage lender with a national presence, we place the highest priority on your safety and security. Contact Team Coughenour for a complimentary consultation.