In our last Grandview Lending blog post, we talked about some common questions that older homeowners may have concerning Home Equity Conversion Mortgage (HECM)   reverse mortgage loans. If you’re 62 and older, a reverse mortgage loan can help you supplement your Social Security, pay for unplanned medical bills or take care of home repairs. But in order to make the right decision based on your situation, you need to be knowledgeable about all the facts concerning reverse mortgages. Therefore, here are some common questions and answers about reverse mortgage loans.

1. How does a reverse mortgage loan compare to a conventional mortgage?

With a conventional mortgage, you receive a lump sum and make monthly payments to your lender until the loan is repaid. With a reverse mortgage loan, the lender pays you cash, either in an upfront lump sum, as fixed monthly payments, through a line of credit, or a combination of these options.

2. What restrictions apply to the cash I receive from a reverse mortgage loan?

You can spend the money you receive from a reverse mortgage loan any way you want. It’s non-taxable, and it doesn’t affect your Social Security or Medicare benefits. However, we do recommend that you talk with your financial advisor to determine if it will affect any other benefits you may be receiving.

3. When does a reverse mortgage loan become due?

A reverse mortgage loan comes due when:

• The last surviving borrower dies.
• The house is sold or the borrowers transfer the title of the property to a third party.
• The borrower doesn’t inhabit the house as their principal residence for 12 consecutive months, because of physical or mental illness.
• The borrower stops paying their insurance or property taxes, and all attempts to rectify the situation have failed.
• The borrower fails to maintain the home, and refuses or is unable to make property repairs.

When a reverse mortgage loan becomes due, you or your heirs can:

1. Pay off the loan, including interest and fees due.
2. Sell the home to repay the loan. You or your heirs can keep the difference between the net sales proceeds and the loan balance. If the sale of the home doesn’t cover what’s due on the loan, you or your heirs are not liable to make up the difference.

4. What are my obligations under a reverse mortgage loan?

With a reverse mortgage loan, you retain the title to your home. Like any homeowner, you’re responsible for maintaining the property, and paying for property taxes and insurance, as well as any homeowners’ association dues, if applicable.

We hope this information on reverse mortgage loans has helped you with your decision-making process. But if you have more questions, please contact the mortgage specialists at Grandview Lending. We can answer your questions and walk you through the reverse mortgage loan lending process. Contact us today!

Note: These materials are not from HUD or FHA and were not approved by HUD or a government agency.

Update: The financial assessment requirements are effective as of April 27, 2015.

Photo credit: iStockphoto/cookelma