A reverse mortgage lets homeowners 62 and older borrow against their home equity without a required monthly mortgage payment. Here is how it works from first call to closing, and what happens after.
1. Start with a conversation
Call or text Steve. He will ask about your age, your home’s rough value, what you still owe, and what you want the money to do. That is enough to tell whether a reverse mortgage makes sense and roughly how much you could access.
2. Meet with a HUD-approved counselor
Before you can apply for a HECM, federal rules require a counseling session with an independent, HUD-approved counselor. The counselor is not connected to any lender. They explain how the loan works, what it costs, and what other options you have. Sessions can usually be done by phone. You will get a certificate that is needed for the application.
3. Apply and get the home appraised
Steve helps you complete the application and gather documents such as ID, homeowners insurance, property tax bills and income information. An appraiser sets the home’s value. Lenders also review your finances to make sure you can keep up with taxes and insurance going forward.
4. Close and choose how to receive funds
At closing you sign the loan papers. Any existing mortgage is paid off first. You can take the remaining funds as:
- A lump sum
- Monthly payments for as long as you live in the home, or for a set number of years
- A line of credit you draw on when needed
- A combination of these
For most HECMs that refinance your current home, you have three business days after closing to change your mind.
What you are responsible for after closing
- Pay property taxes and homeowners insurance on time
- Pay HOA dues if you have them
- Keep the home in good repair
- Live in the home as your primary residence
If these are not kept up, the loan can come due. Steve will make sure you understand this clearly before you sign.
When the loan is repaid
The loan comes due when the last borrower sells the home, moves out permanently, or passes away. Heirs can sell the home and keep any remaining equity, or pay off the loan and keep the home. With an FHA-insured HECM, the amount owed is generally capped at the home’s value when it is sold, so heirs are not personally on the hook for a shortfall.
Talk to a real person in Kansas City
Steve Clune is a licensed loan officer for Kansas and Missouri. Call or text with your questions. If you miss him, send a text and he’ll get back to you.