Reverse Mortgage Loans

Reverse mortgage loans enable persons age 62+ to get cash (a loan) that is not paid back until you

move out of your home, no matter how long that turns out to be. This loan relies only on home equity,

so advanced age, low income, and even bad credit (except debt to the Federal Government), does not

prevent this loan from going through.

The most popular form of Reverse Mortgage is the Home Equity Conversion Mortgage (HECM) which is the

one described here. The HECM loan is done through private lenders who compete for your business, but

these loans are backed 100% by the Federal Government through the Department of Housing and Urban

Development (HUD).

How Much Can I Borrow?

The chart below gives examples of the amount of money available at the interest rate of 3.97%. The

interest rate in the discussion here is variable monthly (a slightly higher, variable yearly rate is also

offered); the lower the interest rate, the more money that will be available to the homeowner.

There are several choices for taking the money available; a line of credit, a monthly payment for life

(“tenure”) for a specified period, or any combination of these methods. Notice that the older you are, the

greater the amount available.

Maximum

Tenure Monthly Payment (by age)

Claim Amount

65

75

85

$213,750

$676

$913

$1,417

140,000

448

582

910

85,000

251

332

530

Line of Credit

or Cash Advance by Age

$213,750

$111,916

$133,947

$157,002

140,000

75,668

85,346

100,879

85,000

42,533

48,801

56,724

* The Maximum Claim Amount is either the FHA lending limit in the County, or your home value,

whichever is less.

Pros and Cons of Reverse Mortgages

Pros Include:

• A free educational session conducted by a trained counselor is required before you enroll with a lender.

• A “low” interest rate applies and accumulates only on the funds borrowed so far.

• No repayment until you move; for co-owners, no repayment until you both move.

• Existing mortgages will be paid off with Reverse Mortgage Funds (as long as there are enough proceeds

to do so).

• If you are receiving public benefits (such as SSI or Food Stamps), Reverse Mortgage proceeds can be

managed in a way that does not interfere with benefits.

• No monthly mortgage payments.

Cons Include:

• High start-up costs. While these are not paid out of pocket, there is an immediate debt on the home. So

this loan is costly if you move out of the home soon.

• Required repairs must be less than 15% of the home value (if repair needs are greater, other programs

may help - ask your counselor).

• Any existing mortgage must be paid off, so if existing debt is too large, the Reverse Mortgage might not

provide enough money to do so.

More Questions?

For more information, visit the Internet at www.aarp.org, or call one of the reverse mortgage resources

listed.

Information Resources

AARP

1-888-687-2277

www.aarp.org/money/personal/reverse_mortgages/

Call to receive the free booklet, “Reverse Mortgage Loans, Borrowing Against Your Home.”

Department of Housing and Urban Development (HUD)

www.hud.gov/offices/hsg/shf/hecm/ or

hecmhome.cfm

HUD’s reverse mortgage lender’s list.

Fannie Mae

www.fanniemae.com

National Center for Home Equity Conversion

www.reverse.org

National Reverse Mortgage Association of Lenders

www.reversemortgage.org

US Department of Veteran’s Affairs

www.va.gov/seniors/default.asp

Reverse Mortgage Lenders

American Mortgage Service Co.

11503 Springfield Pk., 45246

Financial Freedom

Wells Fargo Home Mortgage

674-8900

1-800-750-0306

1-800-869-3557