How does a Reverse Mortgage use your home equity?
If you’re considering a reverse mortgage, you need to understand how it uses your home equity. In our free information kit, we explain this with a simple visual. The graph and definitions below come from that guide and show how your equity works.
We do not include exact numbers in this example because every borrower’s situation is different. Your percentages will vary based on your specific scenario.
- Financing Fees: You pay standard mortgage costs such as title fees, appraisal fees, recording fees, and lender fees.
- Insurance Fees: The Federal Housing Administration charges an upfront mortgage insurance premium. This fee funds the Mortgage Insurance Fund and supports reverse mortgages.
- Mortgage Payoff: A Reverse Mortgage is a standalone lien which means any other existing liens or mortgages must be paid off at closing.
- Equity Reserves: With a reverse mortgage, you do not make monthly payments. Instead, interest builds over time and increases your loan balance. Lenders set aside a portion of your equity to account for this growth. This helps slow how quickly your loan balance rises compared to your home value.
- Cash at Closing: These are the funds available for you to access at closing. With a Line of Credit, you are not required to take this money but it is available to you after closing.
- Line of Credit: If you choose the Line of Credit Option this money becomes accessible to you after closing. Some of these funds are available at closing and some are held in reserve until 12 months after closing at which point they are fully accessible at any time or any amount up to the max line of credit
If you or someone you love is considering a Reverse Mortgage in Utah or Colorado and would like additional information, please contact us today for our free information kit.
Trevor Carlson
President/Reverse Mortgage Specialist
Heritage Reverse Mortgage
435-359-9000
Heritage NMLS # 1497455, Trevor?s NMLS # 267962