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Illinois Reverse Mortgage Guide

Illinois Reverse Mortgage

Are you an Illinois homeowner looking for financial options to supplement your income in retirement? 

When considering financial options in retirement, one option uniquely available to older homeowners is to leverage your largest asset — their home.  

A reverse mortgage loan is a financial tool that can provide homeowners with additional income by tapping into their home equity.  

This guide is designed specifically for Illinois homeowners, aiming to provide a comprehensive overview of reverse mortgages, including how they work, who qualifies for them, and the specific regulations and considerations relevant to Illinois residents. 

In this guide, we will walk you through the fundamentals of reverse mortgages, discuss the pros and cons, and offer detailed steps on how to proceed should you find this option suitable for your financial needs.  

Whether you are looking to supplement your retirement income, cover healthcare expenses, or manage unexpected costs, understanding reverse mortgages will help you make an informed decision.  

Find out what a reverse mortgage is and how it can be a strategic part of your retirement planning. 

Get Your Free Reverse Mortgage Guide Here!

A reverse mortgage is a home loan available to homeowners aged 62 or older. It allows them to convert part of the equity in their home into cash while eliminating monthly mortgage payments.

The most common type of reverse mortgage is the home equity conversion mortgage (HECM), also referred to as HECM loans or the HECM reverse mortgage. It is a federally-backed home loan program that is insured by the Federal Housing Administration and the U.S. Department of Housing and Urban Development (HUD).

The amount you can borrow depends on several factors, including your age, the appraised value of your home, current interest rates, and the lending limit set by the federal government. Generally, the older you are and the more your home is worth, the larger the amount you can borrow.

The reverse mortgage loan will first pay off the loan balance you have on your traditional mortgage if it isn’t already paid off. For the remaining loan proceeds, reverse mortgage borrowers can choose how to receive the funds. Options include a lump sum payment, a line of credit, monthly installments, or a combination of these methods.

Once approved, the homeowner can access the funds as agreed upon in the loan terms. These funds can be used for any purpose without restriction.

While the HECM program does not require monthly payments, the loan will need to be paid back at some point. The loan becomes due when the borrower moves out, sells the home, or passes away. In most cases, the home is usually sold, and the proceeds from the sale are used to repay the loan. Any surplus from the sale goes to the homeowner or their heirs.

A key feature of reverse mortgages is that they are non-recourse loans. This means that if the sale proceeds do not cover the loan amount, neither the borrower nor their heirs are personally liable; the difference is covered by the FHA.

reverse mortgage requirements

To be eligible for a reverse mortgage loan in Illinois, applicants must meet several key criteria. Here’s a detailed breakdown of the reverse mortgage requirements:

  • Age Requirement: At least one homeowner must be 62 years of age or older.
  • Residency: The property must be the primary residence of the borrowers.
  • Equity: Homeowners must have equity in their homes.
  • Property Condition: The home must be in good condition, and the homeowner must maintain it throughout the life of the loan.
  • Financial Obligations: Homeowners must be able to continue paying property taxes, homeowner’s insurance, and HOA fees (if applicable).
  • Eligible Property Types: The property must be one of the following: a single-family home, a two-to-four-unit property with one unit occupied by the borrower, an FHA-approved condominium, or an approved manufactured home.
  • Counseling Requirement: Prospective borrowers are required to complete a counseling session with a HUD-approved third-party counseling service.

Home Equity Conversion Mortgage (HECM)

This is the most common type of reverse mortgage and is federally insured. It has up-front and ongoing costs but offers flexibility in terms of disbursement and use of funds. 

Jumbo Reverse Mortgages

These are proprietary reverse mortgages that allow for higher borrowing limits. Homes that qualify for these jumbo programs are typically valued higher than the federal limit for HECM loans. 

Reverse Mortgage for Purchase

The reverse mortgage for purchase, also known as a HECM for purchase, allows seniors to purchase a new home and take out a reverse mortgage simultaneously. It’s ideal for those looking to relocate or downsize. It works by merging a home purchase and reverse mortgage into one transaction. 

Reverse Mortgage Refinance

This option allows reverse mortgage holders to refinance their loan into a new one, accessing additional equity or improving loan terms based on increased home value or favorable interest rate changes. 

A house with a car in front of it.

One of the benefits of a reverse mortgage is the flexibility it comes with, as there are no restrictions on how the money can or can’t be used.

Here are some of the most common uses for the funds obtained through a reverse mortgage:

  • Supplement retirement income
  • Pay for healthcare expenses or long-term care
  • Make home repairs or improvements that can increase the value of your home
  • Cover living expenses
  • Pay off credit card debt
  • Purchase a new home
  • Travel or take a vacation
  • A rainy-day fund for unexpected expenses

The amount that you can borrow with a reverse mortgage depends on various factors, such as the age of the youngest borrower, current interest rates, and the appraised value of your home.  

As a general rule, older borrowers qualify for more. The FHA sets a maximum lending limit on reverse mortgages. The current lending limit for 2024 is $1,149,825.  

To get an estimate of the amount you might receive from a reverse mortgage, please use our reverse mortgage calculator

If you want an even more precise estimate, we recommend talking to one of our reverse mortgage loan advisors.  

Here is an overview of the steps involved in applying for a reverse mortgage

Step 1: Meet with a reverse mortgage loan advisor to assess your situation and answer any questions.  

Step 2: Attend a counseling session with a HUD-approved third-party counselor. 

Step 3: File the application and submit the required documentation. Our experienced loan officers will walk you through this process.  

Step 4: An appraisal and other assessments will be ordered. 

Step 5: The manual underwriting process begins, where the underwriter verifies that all reverse mortgage requirements are met.  

Step 6: Closing will be scheduled, and closing documents will be signed.  

Step 7: You’ll receive the funds after a mandatory waiting period. 

Illustration of an arrow hitting the bullseye of a target

We know that choosing the right reverse mortgage lender to work with is an important decision, and we are honored that you would consider working with us as you embark on this journey.

Here are just a few of the reasons why you should choose Mutual of Omaha Mortgage:

  • We are part of a company that is more than 100 years old.
  • We are one of the top reverse mortgage lenders in the nation.
  • We have an A+ Rating with the Better Business Bureau.
  • We have high customer service ratings on third-party platforms.
  • It’s our mission to help our customers protect what they care about and achieve their financial goals.
  • If a reverse mortgage isn’t right for you, we can help you find another solution that will better fit your needs.

Your home is where you have built your life and created cherished memories with loved ones. We are dedicated to helping you protect your kingdom and maintain the lifestyle you have worked so hard to achieve.

Find out if a reverse mortgage is right for you by talking to one of our experienced reverse mortgage specialists today!

Mutual of Omaha Mortgage is a licensed Reverse Mortgage lender in Illinois. You can get started by calling 800-578-0283 or filling out this form here.    

You can also find an Illinois Reverse Mortgage loan officer in your area through our loan officer directory or by clicking on one of the links below to find a loan officer near you: 

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

Get Your Free Reverse Mortgage Guide Here!