Home Equity Conversion Mortgages for Seniors
New Special Notice: Important Information About Your Adjustable Rate Reverse Mortgage
Reverse mortgages are increasing in popularity with seniors who have equity in their homes and want to remain in their homes or supplement their income. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Administration (FHA)-approved lender. The HECM is the FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity to use for home maintenance, repairs, or general living expenses. HECM borrowers may reside in their homes indefinitely as long as property taxes and homeowner's insurance are kept current.
The amount that will be available for withdrawal varies by borrower and depends on:
- Age of the youngest borrower or eligible non-borrowing spouse;
- Current interest rate; and
- Lesser of appraised value or the HECM FHA mortgage limit or the sales price.
If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. To learn more about FHA's HECM program:
- General Information
Adjustable-rate loans are changing, because a widely-used interest rate index expires in June
LIBOR stands for London Interbank Offered Rate and is an index of interest rates commonly used in Home Equity Conversion Mortgages (HECMs). LIBOR expires on June 30, 2023, as part of a transition that has been planned for several years. Adjustable-rate HECMs based on LIBOR must change to a replacement index selected by the Secretary of HUD.
On May 2, 2023, FHA announced that the Secretary has selected the Chicago Mercantile Exchange (CME) Term Secured Overnight Financing Rate (SOFR) index to replace LIBOR. The CME Term SOFR index was selected because it is comparable to the LIBOR index and will minimize disruption to borrowers from this transition.
The CME Term SOFR index can be found on the website of Refinitiv, the company publishing the index.
You will receive notices from your lender about any change to your interest rate. No action is required from borrowers, but if you have questions or concerns about the changes, contact your lender or servicer. You can also contact the FHA Resource Center for assistance at (800) CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TTY by calling the Federal Information Relay Service at (800) 877-8339. You may also submit your question(s) to the FHA Resource Center by email at: answers@HUD.gov or you may also visit our online Knowledge Base at: www.hud.gov/answers, which is available 24 hours a day/7 days a week.