Many borrowers falsely assume that their reverse mortgage payment won’t become due until they pass away, but there are several other factors that could cause your loan to reach maturity and require repayment sooner than you expect. While most reverse mortgage borrowers understand how reverse mortgages are repaid, the confusion that often surrounds these loans has to do with when they need to be repaid. If the sale value of your home turns out to be less than what you owe, most reverse mortgages are non-recourse, meaning that the FHA will make up the difference. The funds from the sale are used to repay the mortgage, and the borrower (or their heirs) keep any remaining proceeds. Instead, you repay the entire loan at once.Īs you probably already know, a reverse mortgage is repaid by selling the home that’s securing the mortgage. Unlike a traditional home loan, you don’t make payments month-to-month. A reverse mortgage must be repaid (and it may need to be repaid sooner than you think).Ī reverse mortgage is a type of loan, and like any loan, it must be repaid.
Usually, that purpose is either to make repairs to the home or pay off property taxes. These are offered by local governments and nonprofits and allow homeowners to tap into a small amount of their equity for a single purpose. That being said, proprietary reverse mortgages don’t have as many requirements or charge as many fees, making them an appealing option for some retired homeowners.Īnother non-federally back loan option available is called a single purpose reverse mortgage. For instance, you’ll need to meet with a mortgage counselor to make sure you understand how a reverse mortgage works and if it’s really the best option for you.Īlso called jumbo loans, this type of reverse mortgage is for seniors whose homes are valued above the FHA’s borrowing limit, which is capped at $726,525 as of 2019.īacked by private lending companies, these loans typically don’t include the same protections as government-backed loans. None of the financial burden will fall on you or your heirs.Īlong with extra protections, a HECM loan also requires extra steps. If the value of your home has decreased, the government will pay the difference. As we’ve already mentioned, you’ll never have to pay back more than what you’re home is worth. To help you understand your options, here are the main types of reverse mortgages in Florida in a nutshell:Īs we’ve already mentioned, HECM loans are backed by the federal government and include consumer protections that make them a relatively low-risk borrowing option.īecause they are easily the most popular type of reverse mortgage in Florida, most of this guide pertains to HECM loans. But depending on your situation, a non-HECM loan might actually be a better option. With a HECM loan, you will never have to pay your lender more than what you borrowed or more than your home is worth.ĭon’t assume that every reverse mortgage in Florida is a HECM loan with the same protections that a federally insured loan offers. These are called House Equity Conversion Mortgage (HECM) loans. Most reverse mortgages are insured by the Federal Housing Administration (FHA). There are different types of reverse mortgages. There is no one-size-fits-all retirement plan, but it does help to have multiple sources of income instead of putting all of your eggs into one basket. The money you earn from your home’s equity from a reverse mortgage should be supplemented by one or several of the following: However, it shouldn’t be the only part of your financial strategy.
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While the ads on TV can be misleading, they’re right when they say that a reverse mortgage can help you cover unexpected costs throughout your retirement. A reverse mortgage shouldn’t be your only source of retirement income. So before you sign on the dotted line, here are seven things you should know. The more you know about how a reverse mortgage in Florida works, the better off you’ll be. On the other hand, if you’re not careful, it can lead to financial disaster and even foreclosure.
In the right situation, a reverse mortgage can be a great financial solution during retirement.
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But a reverse mortgage is not free money, and many Floridians end up misusing this type of loan or falling victim to scams. But while the commercials advertising these loans make it sound simple, there’s actually a lot more to it than that.Īs the retiree capital of the country, it’s no surprise that reverse mortgages in Florida are so popular. If you’re over the age of 62 and own a home, a reverse mortgage can help you turn your home’s equity into cash.
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