You may have already heard about the reverse annuity mortgage, however that term describes one of five options for senior mortgages that senior homeowners can choose from.
Senior Homeowners 62 and older, who have little or no mortgage balances remaining, and are currently living in the home are eligible to participate in the FHA reverse mortgage loan program. While commonly called a reverse annuity mortgage With the FHA reverse mortgage loan, seniors are allowed to borrow against the equity in their homes. Seniors can select from five payment plans:
- Line of Credit – unscheduled payments or in installments, at times and amounts of your choosing until the line of credit is exhausted is a popular FHA reverse mortgage loan option.
- Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term – equal monthly payments for a fixed number of months selected.
- Modified Tenure – combination of line of credit and monthly payments for as long as the borrower remains in the home.
- Modified Term – combination of line of credit and monthly payments for a fixed period of months which you choose
Seniors who already have a FHA reverse mortgage loan, and whose circumstances change, may be able to restructure their payment options.
Unlike traditional home equity loans, an FHA reverse mortgage loan does not require repayment as long as the senior lives there. FHA reverse mortgage lenders recover their principal, plus interest, when the home is sold. The home equity remaining after sale goes to the homeowner, estate or heirs.
Since the FHA reverse mortgage loan program is in fact FHA insured, you can never owe more than your home’s value. If the home is sold and proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) provides this coverage and collects an insurance premium from all borrowers.
The amount a homeowner can borrow depends on the age of the youngest borrower, the current interest rate, the appraised value of the home or the FHA’s mortgage limits for the area, whichever is less. The older you are, and the lower the interest, the more you can borrow with an fha reverse mortgage loan.
There are no asset or income requirements on borrowers receiving an FHA reverse mortgage loan.
There are also no requirements on the value of homes qualifying for an FHA reverse mortgage loan. The value of the home will be determined by an appraisal. However, the amount that may be borrowed is derived from the lower of the appraisal amount or FHA mortgage limit for the area. FHA lending limits vary from $200,160 to $362,790.
In Alaska, Guam, Hawaii and the Virgin Islands, the FHA reverse mortgage loan limits may be adjusted to 150% of the lending limit ceiling depending on the area. The FHA limits usually increase yearly.
