In October 2017, the Department of Housing and Urban Development (HUD) changed the insurance costs for reverse mortgages. Because lenders cannot demand payment from homeowners or their heirs if the loan total exceeds the home’s worth, insurance premiums create a reserve from which lenders can draw to avoid losing money in this situation.

The amount of money you get from a reverse mortgage is determined by the lender and your payment schedule. The amount you can borrow with a HECM is determined by the age of the youngest borrower, the interest rate on the loan, and the lesser of your home’s appraised value or the FHA’s maximum claim amount, which is $822,375 as of January 1, 2021.

You can’t, however, borrow 100% or even close to 100% of the value of your home. The loan’s expenditures, such as mortgage premiums and interest, must be paid with a portion of your home equity.

It’s important to have a strategy in place for dealing with your reverse mortgage loan after you pass away. Family members must also be aware of their alternatives for keeping the residence, as well as their financial obligations. Depending on how much equity you have in your home and whether you want the house to stay in your family after you die, repaying the loan can be complicated.

Yes. Refinancing a reverse mortgage is possible if it has been at least 18 months since the original reverse mortgage was closed. Refinancing a reverse mortgage should be held for circumstances where a spouse has to be added to the loan, greater equity is needed, or the interest rate was significantly reduced.

A reverse mortgage and a home equity loan both use the equity you’ve built up in your home to provide you access to funds. A home equity loan is different because you need to make regular monthly interest and/or principal payments. With a reverse mortgage, on the other hand, you don’t have to make any monthly mortgage payments as long as you live in the house.

With a reverse mortgage, you can live in and have ownership of your home without having to make monthly mortgage payments. Until you permanently leave the home, you are not required to repay the reverse mortgage loan or make any monthly mortgage payments.

The money you get from a reverse mortgage is also usually tax-free and will not affect your Social Security or Medicare benefits because it is not considered income. You can also use this money as you please.

There are no restrictions on how you can utilise the money, including daily living expenses, home remodelling costs, healthcare costs, paying off current debts, postponing receipt of social security income, assisting loved ones, or just increasing your retirement years.

For many people, the money serves as a financial safety net in case of unforeseen financial needs.

First and foremost, the reverse mortgage must be secured against the borrower’s primary residence, which is the home where they spend the majority of their time (typically six months or more). The majority of reverse mortgages are taken out on single-family houses with only one unit. 

Most programs also allow two- to four-unit structures as long as the borrower owns and occupies one of the units. Reverse mortgages are often not available for mobile homes or cooperatives.