The full explanation
Instead of making monthly payments, you receive money; interest and fees are added to the balance each month, so the debt grows and your equity shrinks. The home stays in your name, but you must live in it, pay property taxes and insurance and keep it in good condition. It is repaid when you no longer live there, usually by selling the home. To get a HECM you must receive counseling from a HUD-approved agency.
An example
Ramón and Elena want to stay in their home. Before applying for a reverse mortgage they talk with a HUD-approved counselor and with their children about what will happen to the house in the future.
You will see it in…
- The HECM counseling certificate
- The reverse mortgage's Good Faith Estimate (GFE) and HUD-1 settlement statement
- Statements showing how the balance grows
