Four Frequently Asked Questions about Reverse Mortgages

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1. What is a Reverse Mortgage or Home Equity Conversion Mortgage (HECM)?

A Home Equity Conversion Mortgage (HECM) is commonly known as a Reverse Mortgage. HECM is a home-secured loan designed to help homeowners 62 years of age or older turn some of their home equity into cash. You may choose to receive monthly payments, a lump sum of cash, or a line of credit. HECM is insured by the Federal Housing Administration (FHA) and offers all the benefits of a traditional line of credit that you can get from a bank but with additional benefits— including a flexible repayment feature. As with any mortgage, you must meet your loan obligations, keep current with property taxes, insurance, maintenance, and any homeowner’s association (HOA) fees.

2. How much money can I get?

The specific amount of funds available is based on several factors, including the appraised value of your home, your age, current interest rates, and Federal Housing Administration (FHA) lending limits.

3. How do I receive my proceeds from the Reverse Mortgage?

Proceeds from the Reverse Mortgage are tax-free* and can be distributed in a variety of ways based on your choice. Proceeds from the Reverse Mortgage may be taken as:

  • A lump sum
  • A Line of Credit
  • Monthly payments for a specified time period
  • Monthly payments for as long as you live in the home
  • Or a combination of these

4. What are the costs associated with a Reverse Mortgage?

In addition to interest, the costs include a title fee, credit report fee, appraisal fee, origination fee, closing costs, mortgage insurance premium, and a modest charge for the Reverse Mortgage counseling. Consult with a Housing and Urban Development (HUD)-approved reverse mortgage counselor before you apply. A counselor can help you decide whether a reverse mortgage or some alternative is the best choice for you. To find a HUD-approved Home Equity Conversion Mortgage (HECM) counselor near you, call (800) 569-4287.

While closing costs vary based upon the size of the loan, they’re the same as those for any traditional mortgage. You can roll most of the up-front costs into the loan, so out-of-pocket expense can be minimized.

* Wheelhouse Credit Union cannot provide tax advice. Please consult a tax advisor.

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