Securing a Pennsylvania Reverse Mortgage

A Pennsylvania reverse mortgage can help you retire securely with the income you need to live well if you’re over the age of 62 and you own a home in the state.  This is about the extent of the qualification requirements for this loan type, making it a swift and simple financial solution for seniors everywhere.

What is a reverse mortgage?

Your lender takes over control of the equity in your home and pays you for it each month or in a lump sum; this is why these loans are called reverse mortgages -  your lender is paying you instead of the other way around.  

How can reverse mortgage funds be used?

The money you receive is technically your own home equity, transformed into a liquid form that can be spent on anything you want or need.  Use it to pay for medical costs, a nice vacation, other debts, or simple day to day expenses.

What types of reverse mortgages exist?

Reverse mortgages have three forms:

• Goverment-insured: FHA HECM (Home Equity Conversion Mortgage).
• Single-purpose: backed by nonprofits or state or local government agencies. 
• Proprietary: backed by private entities.

The most common source is the FHA HECM reverse mortgage, which is insured by the Department of Housing and Urban Development (HUD). This article will focus on HECM reverse mortgages.

Who can get a reverse mortgage?

Homeowners aged 62 and older who own their home outright and have most of their mortgage paid off. If the current mortgage is not paid off, the initial reverse funds or some combination with out-of-pocket cash must be used to deplete the remaining balance. Credit score is not a qualifying factor. 

What costs are associated with a reverse mortgage?

There are several costs associated with securing an HECM reverse mortgage in Pennsylvania, including but not limited to:

• Upfront fees: include the lender's fees, and can be paid from the reverse mortgage funds. This means, however, that the money taken cannot be borrowed back. So a $200,000 reverse mortgage with $16,000 in fees paid via the reverse mortgage funds will leave the homeowner with $184,000. 
• Closing fees: include all the same fees required of a traditional mortgage closing. 
• Reverse mortgage counseling fees: HUD mandates all reverse mortgage homeowners attend reverse mortgage counseling. Fees are in the $100 range but can be waived for lower income seniors. 
• Mortgage insurance: an upfront mortgage insurance premium (MIP) must be paid for reverse mortgage borrowers. It can be as low as 0.5% and as high as 2.5% of the appraised home value, unless the home is over $625,500, in which case the upfront mortgage insurance is calculated by the lender. 

How will I receive my funds, and for how long?

You can get the money from your lender in a number of ways.

• You can choose to receive it on a monthly, scheduled basis.  This allows you to treat it as income and allot it as you need it.
• You can choose to receive the full amount of your equity, minus expenses, up front at the start of the loan.
• You can set up a credit line with your lender that you don’t have to pay back.
• You can combine any of the methods to create a customized payout plan.

Your lender will own the equity in your home during and after the reverse mortgage.  This knowledge scares some Borrowers, who fear that they will lose their homes once the equity turns out.  This is not the case.  Your lender does not own the title or deed of the property and cannot repossess the home.  You don’t need to worry that you’ll lose your home.  This can’t happen through a reverse mortgage.

Does the equity need to be repaid?

You don’t have to pay the loan off during your lifetime unless you want to sell your home or move to a new home.  If you choose to do either of these things, your lender will need to collect on the amount of the equity that is owed.  But if you continue living in your home for the rest of your life, you won’t have to pay back any of the debt.

Your heirs will be responsible for paying back the reverse mortgage when you pass away.  This is usually done through a sale of the home.  Lenders cannot collect more than what the home sells for, even if the property has decreased in value and doesn’t account for the full amount of the debt owed.

Pennsylvania Reverse Mortgage Lenders

No two lenders offer the same loan terms and options, but many, if not all, lenders are willing to administer reverse mortgages.  You have to be careful, though, because many lenders will charge you very high fees simply for the right of accessing your own home equity.  There are closing costs tied to every loan, of course, but try to find a lender who will charge you a fair price.

The best way to do this is to compare multiple lenders in your part of Pennsylvania.  Ask them what rates they offer and what fees they charge.  For more information on how best to do this, read our reverse mortgage checklist.

Pennsylvania Senior Resources

Pennsylvania's Department of Aging has a number of community and home oriented programs that enable seniors to live at home while preserving their independence. Caregiver support is available, as well as resources for grandparents living with grandchildren. Visit the Home and Community senior services page for more information about how the Department of Aging's resources may supplement a reverse mortgage for you or your loved one. 

Lenders in: Pennsylvania.