The FHA reverse mortgage program, in situations where a mortgage has been settled in its entirety or with a small balance remaining, allows you to borrow funds against the equity of your home. This facility is provided to homeowners who presently live in the home that the borrowing is going to be made against and are below the age of 62.
There are five methods of repayment, which gives the borrower a lot of flexibility in choosing base on their current requirements. The first method is tenure, where a fixed monthly payment can be made as long as one of the borrowers still lives and still lives in the same home. The second method is the term method, where a specific number of months are selected as the repayment period with fixed monthly payments. The line of credit method, allows the borrower to pay back in installments of whatever is convenient to him/her at the time until the total line of credit has been paid back. The final two methods are a combination of line of credit and the term and tenure methods.
As long the home is your principal form of residence, the FHA reverse mortgage HECM, unlike standard mortgages, does not require repayment. This is because the lender, once the home is sold, will require his principal amount along with any interest owed, thereby recovering all dues. In the event that the sale of the home does not cover the lenders costs, the FHA will pay any shortfalls from an insurance premium it collects from the borrowers at the start of mortgage.