Reverse Mortgage Loan Blog

Q: Can you suggest brochures or books that provide information about reverse mortgages? I am 85 years old, my income is $33,000 a year, and my sole asset is my house. It is worth about $450,000, and the mortgage is fully paid.

E.J., Williston Park

A: A reverse mortgage lets you borrow against the value of your house; you can take the loan as a lump sum, as a line of credit or as equal monthly payments. (If you don’t own the house outright, you must pay off any outstanding mortgage with the loan proceeds.) Your eligibility for a reverse mortgage isn’t based on your credit-worthiness. It’s based on your age, the value of your house and the county you live in. No payments are due as long as you live in the house, maintain the property and pay taxes. When the house is sold, the sale proceeds repay the lender.

Depending on what happens to real estate values, the mortgage could wipe out your equity if you live long enough. But it’s a “non-recourse” loan, which means you can’t owe the bank more than the market value of the house: If it sells for more than you owe, you (or your heirs) get the excess. If it sells for less than your loan balance, federal insurance makes up the difference.

There’s almost always something left for the homeowner’s heirs, because the amount you can borrow is limited, says Mike Temares, a reverse mortgage counselor at the Nassau County Family and Children’s Association. The maximum FHA-insured loan in New York City, Nassau and Suffolk now is $362,790 regardless of the value of your house. At 85, with a $450,000 house, the most you can borrow is about $269,000. (The exact amount depends on the interest rate, which changes weekly.)

The downside: This is a very expensive loan. Origination charges, closing costs and monthly service fees can equal 8 percent of the value of the house. (These fees aren’t paid upfront; they’re due, along with accrued interest, when the house is sold.) If you’re likely to move in five years or less, the mortgage isn’t worth its cost. You’d be better off freeing up your equity by downsizing to a less expensive house. And even if a reverse mortgage makes sense for you, you may want to wait a year or two. The government is expected to raise the maximum FHA-insured loan to $417,000 nationwide next year, and costs will fall as more lenders enter the market.

Q: Can someone who lives in, and owns, a co-op apartment in New York State apply for a reverse mortgage? The ads seem to be directed only toward owners of single-family homes.

J.F., Bayside

A: Co-ops don’t currently qualify for FHA-insured reverse mortgages, but pending legislation is expected to make them eligible by early next year.

Financial Freedom and BNY Mortgage offer non-FHA insured “jumbo” reverse mortgages on co-ops. Like FHA-insured reverse mortgages, these are nonrecourse loans. But they cost more than government-insured mortgages and are available for bigger amounts.

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