What Is Reverse Mortgage Purchase?

Reverse mortgage purchase, also known as HECM for purchase allows seniors aged 62 years and above to use a reverse mortgage (RM) to purchase a new principal residence using the proceeds from the RM. It was set up because HUD saw a growing need for seniors to be able to easily relocate, either to be closing to friends and family or to relocate to residences that better suit their needs (for example: single storied houses, wider doorways, ramps instead of stairs, safe bathrooms).

Reverse Mortgage Purchase FAQ’s

You can view all the reverse mortgage purchase FAQs on the official HUD site by clicking here.

What Property Types Are Eligible?

One to four bedroom units which are finished and deem as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.

This page is dedicated to reverse mortgage facts, we are trying to build the biggest list of facts on the web. You can help us by letting us know about more facts in the comments. Think one of our facts is wrong? Also tell us in the comments!

Common Reverse Mortgage Facts

• Borrowers must be over the age of 62 to apply for a reverse mortgage
• A certificate of counselling must be obtained from a licensed HUD counsellor to apply for a FHA insured reverse mortgage
• Reverse mortgages must only be taken out the borrowers principal residence
• The maximum loan amount for a HECM reverse mortgage is $625,000. Any loans greater than this require what is known as a Jumbo reverse mortgage.
• Reverse mortgages are not payable until the end of the loan, at which point any principal plus fees plus interest becomes payable. The estate/heirs are given 60 days to either pay this amount in full or sell the house and use the proceeds of the sale to pay for the loan.

There are a number of reverse mortgage fees, some are directly related to the loan whilst others are indirectly related to the loan. In this article we will have a look at both of these fee types.

Indirect Reverse Mortgage Fees

These are fees that are necessary to get a reverse mortgage but that many people don’t include because they not charged by the lender.

• Real estate appraisal, this is necessary to gauge the value of the home. This can cost anywhere from $300 – $500 depending on the real estate agent and the local area. It’s important to always use a licensed real estate agent or the valuation will be useless.
• Title insurance, this usually costs somewhere between $500 and $1000 but varies depending on the location and also the coverage included.
• Title, attorney and county recording fees, varies but is usually in the $500 neighbourhood.

Direct Reverse Mortgage Fees

There are a number of direct fees that are an intregral part of getting a reverse mortgage, these have been listed below along with how much they are likely to cost a borrower.

• Origination fee, this is the fee that lenders charge for setting up a reverse mortgage. It’s the higher of 2% or $2,500 for the first $200,000 and then 1% thereafter. This has maximum cap of $6,000 on it.
• Monthly service fees, most lenders will typically charge anywhere from $15 and $35 per month for facilitating a reverse mortgage. This fee of course depends on the lender chosen.
• Mortgage insurance, generally 2% of the appraised value of the home.

How Much Can An Individual Expect To Pay In Reverse Mortgage Fees?

The amount an individual can expect to pay will be highly dependent on the value of their house and the area that they live in. In general people can expect to pay anywhere from $4,000 to $10,000 in reverse mortgage fees.

Finding a reverse mortgage counsellor is an important and necessary step before taking out a RM loan. In fact before you can be approved for this loan type you need to receive what is known as a ‘certificate of counselling’, to get this you must seek out a HECM counsellor that has been approved by HUD.

Finding Reverse Mortgage Counselling

Finding a counsellor couldn’t be easier you can contact the official HUD call line on (800) 569-4287 or you can visit their website by clicking here.

What’s The Use Of A Reverse Mortgage Counsellor?

This counsellors job is to provide unbiased information and advice on what a reverse mortgage is and how it can affect a persons life (both positively and negatively). By requiring borrowers to seek out a counsellor before the loan can be approved the HUD is able to ensure that borrowers are not getting sucked in by snake oils salesman and truly understand how a reverse mortgage works.

There are a number of reverse mortgage companies that are focused on providing HECM loans and in some cases ‘jumbo reverse mortgages’. We’ve broken these companies into three main categories; reverse mortgage banks, reverse mortgage brokers and reverse mortgage companies.

Reverse Mortgage Banks

Due to the GFC and the credit crunch banks in recent years have been pulling out of the reverse mortgage market. This may be due to the relatively low volume, or the fact that these loans are seen as riskier than a traditional mortgage. That said many banks have instead being transitioning to other seniors related lending products such as mortgage refinancing or home equity loans, one example of this is bank of america who are no longer accepting applications for RMs.

Reverse Mortgage Brokers

Rather than going through a reverse mortgage broker, why not go through somebody that will compare ALL reverse mortgages – not just the ones paying the highest commissions? Here are reverse mortgages compared, we compare all reverse mortgage lenders to give you the best RM there is. Fill out the form at the top of this page to find out what loan suits you best.

Reverse Mortgage Companies

If a company is not a licensed reverse mortgage lender, it’s best to avoid them completely.

Got a question about a broker, company or bank? Let us know in the comments and we will do our best to keep you informed.

Unfortunately there are a lot of reverse mortgage scams out there, this may have something to do with the general public’s perception that seniors are more gullible than the rest of the population. Regardless of the reason, preying on seniors is absolutely disgusting and these people should be ashamed of themselves.

We’ve set this page up to look at the most common scams and how seniors can avoid them.

Types Of Reverse Mortgage Scams

Never Pay For Information

One of the more common scams is to charge seniors a ridiculous amount for information related and pertaining to reverse mortgages. All the information that a senior needs about reverse mortgages can easily be found on this website, the official HUD website and also by seeking advice from a FHA licensed reverse mortgage counsellor (0r by calling (800) 569-4287). This counselling service is unbiased information that is provided completely free of charge by the HUD.

Reverse Mortgage Counselling Scam

One of the great things about HECM reverse mortgages is that they require lenders to receive a ‘certificate of counselling’ before they are able to apply for a reverse mortgage. These counsellors jobs is to provide lenders with unbiased information and advice pertaining to reverse mortgages. In recent years some of these counsellors have teamed up with reverse mortgage lending institutions to try and push seniors into loans with that specific lender. This is against the rules and should be reported immediately to HUD.

These counsellors are also provided completely free of charge by HUD, so anybody who tries to charge you for a reverse mortgage counselling session is out to con you. Before setting up a session with anybody, make sure they are a FHA licensed counsellor.

Reverse Mortgage Repair Scams

Due to the FHA appraisal process some homes may require repairs or maintenance to be performed on the home before a reverse mortgage will be granted. A common scam is that a reverse mortgage company will offer repairs and maintenance to be made through their recommended provider. This recommended provider then charges exorbitant prices and gives a kick back to the loan provider. To avoid this it’s important that you ask the appraiser what repairs need to be made to the home before the reverse mortgage can be closed. It’s also important to get multiple quotes for each of the repairs that need to be made. In some cases the contractor will even allow you to pay on closing (e.g pay the full amount for the contract work after the reverse mortgage has been settled)

Reverse Mortgage Foreclosure Flipping

This is a fairly new scam that has only just recently entered the market due to the recent legislation changes that allow seniors to use reverse mortgages to purchase a new principal residence. This is a fairly complicated scheme so we will do our best to put this into laymen terms everybody can understand.

Investor buys a foreclosed home for below it’s market value, the investor then arranges a bogus sale to a senior at an inflated price. The senior then immediately takes out a reverse mortgage at the inflated price. The senior then pays back the investor and owns a home that they’ve paid zilch (zero, nada, nothing) for.

But doesn’t everybody in this situation win? The senior gets a home for free, the investor makes a tidy sum of money and everybody is happy, right? Not exactly. If a reverse mortgage is set up using a fraudulent property value then tax payers will eventually be on the hook when the residence eventually sells for less than the property value (this is because these loans are insured by the FHA, a government organization).

The easiest way to spot this scam is when seniors are asked to sign a quit claim deed upfront on a rehab or foreclosed home. HUD and FHA are well aware of this scam and it wouldn’t surprise me if seniors and investors that engage in this scam get hit with heavy penalties. Like they say in life, there is no such thing as a free lunch.

If you believe you’ve been the victim of a scam, or you’d like to report potential abuse you can do so by contacting your homeownership center.

A reverse mortgage is a way for seniors aged 62 years or above to unlock the equity that is stored in their primary residence.

Reverse Mortgages Explained In Layman Terms

It’s fairly easy to explain what a reverse mortgage is. In fact, as the saying often goes ‘It’s All In The Name’. A reverse mortgage is simply, a mortgage in reverse. In a traditional mortgage the borrower borrows the principal which is used to pay for the home in full, they then pay this principal back each and every month plus any interest that has accrued in the loan. Eventually this leaves the borrower with a home that they own in full. The money that is now tied up in the home is often referred to as ‘Equity’.

In reverse mortgages, the borrower receives money  (they can opt to receive a lump sum at the start, a line of credit or regular monthly payments) at the start of the loan. Instead of making regular monthly payments to pay off this loan, the interest and any additional payments that are made to the borrower are then added to the loan.

This loan only becomes payable when one of the following occurs; the home is no longer the primary residence of the borrower,  the home owners pass away or the home owners fail to meet conditions that are set out in the reverse mortgage (for example, certain maintenance minimums must be meet).

Once the loan becomes payable the borrower (or their estate/heirs) has a period of 60 days to either pay the mortgage in full, if this is not done the home will be put up for sale and the proceeds will be used to pay for the loan. As long as the RM comes with what is known as a non-recourse limit then the borrower can never own more than the house is worth – which is why lenders will generally never loan more than 40% of the value of the house.

For a borrower to successfully obtain a reverse mortgage, they must meet some requirements. They must be 62 years of age or above, they must have a certificate of counselling which can be obtained through a licensed FHA reverse mortgage counsellor (these counsellors are provided free of charged by HUD), they also must own the home outright (or be able to pay for any existing liens in full with the proceeds of the loan). Because no payments have to be made until the end of the loan (which is then paid in full) there are no credit checks or income requirements.

Reverse Mortgages Explained In A Story

Taylor is a 67 year old single home owner that lives in sunny Gainesville, Florida. Her home is valued at $700,000 and she is looking at ways she can spend some of the money that is currently locked up in her home. A reverse mortgage is an easy way for her to access this money whilst still allowing her to maintain the title to her house and to continue living in it.
Got a question? Think you can explain reverse mortgages better? Let us know in the comments section!

A reverse mortgage specialist is somebody who’s main job is to provide information, advice and even quotes for reverse mortgages.

Reverse Mortgages Compared is an online version of a reverse mortgage specialist, we aim to provide the most up to date, easy to understand and comprehensive information on the internet – best of all, all of our advice is completely free. A reverse mortgage allows seniors that are 62 years of age or above to get the money that is tied up in their primary residence in cash, the payment options are extremely flexible (lump sum payments, line of credit, on going payments or even a mixture are all available).

The biggest advantage in getting a reverse mortgage is that it lets seniors stay in their homes whilst having access to money so that they can enjoy their retirement. With the new HECM for purchase scheme, seniors can also use a reverse mortgage to transition into a new home that better suits their needs (whether it be being closer to family or having access to more functional houses with wider doorways).

The biggest disadvantage is the high start up costs and the fact that compound interest quickly adds up and can become unmanageable leaving seniors with little to no equity in their homes. This can be especially damaging if the senior needs to transition into aged care and there is not enough equity left in their original home to do so. It also removes a lot of equity that they may have banned to pass onto their heirs after death.

That said, if a senior understands how a reverse mortgage works and the fees involved the extra money can be extremely liberating and can help the senior to lead a fuller more involved life.

Fill out the form at the top of this page to get more information on a reverse mortgage, including quotes!

Reverse mortgages for seniors are a special home equity conversion product aimed at people who are aged 62 years or older and are needing extra money. It allows these seniors to access the equity that is currently tied up in their home whilst still allowing them to own the title of the house and live in it.

Reverse Mortgages For Seniors Explained

To be eligible for a reverse mortgage a senior must be aged 62 years or above, they must be using the home they are getting the loan out on as their primary residence and they must own the home outright OR be able to pay any existing liens with the proceeds of the mortgages.

Once these criteria are met, the senior needs to sit down with a FHA approved reverse mortgage counsellor, it’s this counsellors job to provide unbiased advice and information to the senior about the upsides and downsides of a reverse mortgage (of which there are many). Once this counselling has finished, the senior will receive what is known as a ‘certificate of counselling’.

The senior is then free to apply for and be approved for a reverse mortgage. The loan they choose, including the amount and payment type is completely up to them – although there are a few restrictions. In general you may not borrow more than 40% of the homes value, the home must also met certain maintenance standards and must maintain these standards while the loan is active. There are five main payment types: tenure (fixed monthly payments as long as the loan is active), term (fixed monthly payments for a predetermined period of time), line of credit (payments can be taken by the lender as they so need, up to a predetermined limit), modified tenure (mixed of line of credit and tenure), modified term (mixture of term and line of credit).

The beauty of a reverse mortgage is that no money needs to be repaid, all interest and fees along with any money taken out is attached to the loan and is made payable at the very end of the loan. As such there are no credit requirements or credit checks necessary.

Get more information on reverse mortgages by filling out your information at the top of the page!

A very common question that we often hear from seniors is;

How Does A Reverse Mortgage Work?

F.A.Q.

The answer is actually more simple than it might at first seem. A reverse mortgage works by unlocking the equity that seniors have tied up in their homes. Now let’s break that down into simple terms that everybody can understand.

In a traditional mortgage the borrower pays a monthly fee, this monthly fee pays for the interest on the loan as well as a portion of the principal (the principal is the original loan amount that was used to purchase the house). By doing so the borrower is slowly building up equity in the house.

In a reverse mortgage the borrower receives a monthly payment or a lump sum payment (or in some cases both). This money must be eventually paid back, but rather than paying it back over the life of the loan, a reverse mortgage is paid back in full with all interest charges added to it at the end of the loan.

The loan ends when the last surviving home owner moves out of the home permanently or passes away. When this happens the home owner or their estate has a period of six months to do one of the following; sell the house and repay the reverse mortgage or repay the reverse mortgage out of their own pocket and keep the title to the house.

In rare cases where the house value is less than the amount owed on the mortgage, the home owner or their heirs are not responsible as long as their RM came with a no-recourse clause. This clauses ensures that the lender can not come after them for the additional money owed.

Not everybody is eligible for this type of loan, a few specific criteria must be met before a reverse mortgage can be applied for. The borrowers must be over the age of 62, own their home outright (or owe an amount that can be immediately payable with the proceeds of the loan) and it must be their primary residence (for example, these loans are not granted for holiday houses).

A reverse mortgage can be an excellent option for seniors that are looking for extra cash flow, in most cases it will not affect their Medicare or social security benefits. If you’re looking for a free quote or want more information please fill in your details at the top of this page.

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