Home Equity Conversion Mortgages: A Guide To Helping You Qualify

Owning your own property comes with many benefits. However, there are times when you may need to tap into the equity you have built up over the years. There are loans you can take out, but those require almost immediate repayment and might not be the best option if you are on a fixed income. Home equity conversion mortgages could be the answer.

Understanding Home Equity Conversion Mortgages

Funded by the Federal Housing Administration, this type of housing loan allows you to tap into your home’s value. Depending on the lender you choose, you could get a fixed amount, which you can deposit into your bank account to pay off bills, or you could receive a line of credit to withdraw from over time. Some lenders offer a combination of a lump sum and a line of credit.

The money you gain can be used for anything. Repayment plans are fixed in equal payments as long as at least one borrower continues to use the property as his or her principal residence. If you receive a line of credit instead of a lump sum, you may be able to put off installments for several months.

Basic Guidelines

In order to qualify for home equity conversion mortgages, better known as a reverse mortgages, there are some guidelines you must meet. This type of loan is not just for anyone. You must be at least 62 years or older to begin the process.

In addition to your age, you must be mortgaging a primary residence that you currently occupy. You must also own the property completely or only have a small balance on your current loan.

If you owe any type of federal debt, such as backed federal taxes or student loans, you must be up-to-date on your payments. Any recent delinquency will make you automatically ineligible for the Federal Housing Administration program.

In addition to the basic qualifications, as the recipient, you must participate in consumer information sessions. By working with a counselor, you are certain to understand all the terms and conditions to obtaining the money before anything is distributed.

If you are approved for this loan, you are required to keep hazard insurance on your property. Depending on the area, you may also be required by your lender to keep flood insurance current.


As with any financing, there are some costs that are associated with acquiring home equity conversion mortgages. You can add these costs into the financing, but this will reduce the net amount available to you. You can expect to pay insurance premiums, third party charges, and origination fees. You may also have to pay service fees to process the paperwork and some of the interest.

Over the life of your loan, you will be charged a fee of 1.25 percent of the outstanding balance as part of your mortgage insurance premium. This premium is in place to help guarantee that you receive the advances for which you qualify.