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Reverse Mortgage Loan Programs

A home equity loan program for persons 62+ designed to help homeowners tap into the equity in their homes.

A Reverse mortgage loan is insured by the Federal Housing Administration (FHA) and is part of the Home Equity Conversion Mortgage (HECM) program. A Reverse mortgage is only available to homeowners who have built up considerable home equity are 62+ years old. Proceeds of the loan may be taken in monthly payments, a lump sum, left on a line of credit or a combination of these methods. If you remain in your home, you are not required to make monthly payments on a reverse mortgage. Taxes, insurance, homeowner association dues, and other assessments must be kept current by the homeowner, but nothing is due on the reverse mortgage until the last borrower permanently leaves the home.

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Reverse Mortgage Loan Options

The most popular, and one offered through Tidewater Home Funding, is the FHA-backed Home Equity Conversion Mortgage (HECM). A HECM is a non-recourse loan where borrowers will never owe more than the value of the property. A HECM loan may be used on a homeowner’s existing home or on the purchase of a new home. The borrower must pay required taxes, insurance, and if applicable, HOA for all loan options. Additional Reverse mortgage programs include:

Payment of Loan Proceeds: The borrower receives the loan money as a line of credit, monthly installments, a combination or both, a lump sum, or the payment retires an existing mortgage.

Interest Rate: The borrower chooses between a Fixed-Rate or an Adjustable-Rate Mortgage (ARM) loan program. A Fixed-Rate program is only available with the lump sum payment option.

Purchase: Allows the borrower to purchase a principal residence and requires less upfront investment than an all-cash purchase.

Refinance: Allows the borrower to convert one HECM loan into another HECM loan which is usually done to lock in a lower interest rate or to borrower more cash if the home has increased in value.

Loan Program Benefits

Some benefits a Reverse mortgage loan program offers includes:

Helps borrowers age in place
Non-recourse mortgage loan
No credit score (FICO) qualification
Can help Seniors relocate to a different region or move closer to family
No debt-to-income (DTI) ratios although borrowers must demonstrate a willingness and capacity to pay basic obligations
Provides great freedom in retirement – you aren’t restricted on how you can use the loan proceeds and it is non-taxable income
A reverse purchase can help a borrower retain their savings, improve their monthly cash flow, and/or finance a purchase that would normally be beyond their budget
Can help Seniors move into a more affordable home that requires less maintenance or better serve their physical needs by providing features such as handrails, wider doors or a single-story layout

Loan Program Requirements

Requirements for a Reverse mortgage loan include:

Borrowers must be 62+ years old
Borrowers must qualify to pay taxes, insurance, or HOA, if applicable
Borrower must have financial resources to pay ongoing property fees
Borrower and non-borrowing spouses are required to receive independent counseling before obtaining loan
You can own your home outright or have a low balance on your mortgage that can be paid off at closing with proceeds from the Reverse loan

Important Program Features

In addition to program requirements, it’s important to understand the following features of a Reverse mortgage:

Closing costs may be financed requiring limited upfront fees
Funds available may be limited for the first 12-months after the loan is opened per HECM rules
Fixed-Rate and Variable-Rate programs are available with the Fixed-Rate loan option requiring all proceeds to be accessed at inception
Property may be single-family homes, 2-4 unit owner-occupied homes, FHA-Approved condos, or a manufactured home
The amount available to the borrower is based on the age of the youngest borrower, the interest rate of the loan, and the property value up to the maximum FHA lending limit

This is not a commitment to lend. All loans subject to program guidelines including credit and property approval. If refinancing an existing loan, the total finance charges may be higher over the life of the loan.

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