Reverse Mortgage - A special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
Use Your Home to Stay at Home is a user-friendly guide to help older homeowners understand the pros and cons of a reverse mortgage. Federal law requires that all individuals who are considering a reverse mortgage receive unbiased counseling by a HUD-approved counseling agency and receive a copy of the NCOA guide.
Also known as Home Equity Conversion Mortgages (HECMs), reverse mortgages allow homeowners aged 62+ to convert a portion of their home equity into cash while they continue to live at home for as long as they're able. Over the past 20 years, a growing number of older homeowners have used this financial tool. Today, most borrowers use the loans for immediate needs, such as paying off their existing mortgage or other debts. About 33% want to supplement their monthly income, so they can afford to continue living independently in their own home longer.
"Use Your Home to Stay at Home is an older homeowner's best resource when it comes to examining whether a reverse mortgage is right for them," said Amy Ford , director of NCOA's Reverse Mortgage Counseling Services Network. "Along with reverse mortgage counseling from a HUD-approved counselor, the guide is a trusted source of information for older adults to understand their options before they commit to a loan."
The 2013 version of Use Your Home to Stay at Home reflects the latest statistics and rules related to reverse mortgages. The guide can be downloaded for free at www.ncoa.org/RMBooklet. Housing and reverse mortgage counselors can order multiple copies at www.ncoa.org/RMCounselors.
"Reverse mortgages can be a useful piece of the puzzle when it comes to helping older adults make ends meet and stay independent as long as possible," Ford said. "However, they're not for everyone. It's critical that older homeowners and their families get unbiased counseling and information when considering whether to tap into their biggest asset."
As the only national aging organization that provides reverse mortgage counseling, NCOA brings a unique approach to helping older homeowners examine all of their options when it comes to staying independent. HUD requires that all counselors use NCOA's free, confidential BenefitsCheckUp® (www.BenefitsCheckUp.org) service to determine if reverse mortgage clients are eligible for an array of benefits that could help them pay for everyday expenses like food, medicine, and utilities.
In addition, NCOA offers other tools to help older homeowners make the most of their home equity, so they can stay economically secure while maintaining their independence for as long as possible. These include:
For more information about reverse mortgages and home equity options and resources, please visit www.ncoa.org/HomeEquity