Massachusetts Reverse Mortgage Guide

Are you a Massachusetts homeowner who is worried about running out of money in retirement?

A common concern among retirees is whether or not they will have enough money to last them throughout their retirement. This concern has only grown as costs continue to go up as the result of record inflation in recent years.

What options do older homeowners have beyond Social Security, their retirement accounts, or getting a part-time job?

One alternative to consider is finding a way to tap into the equity that you have built up in your home. One option that is exclusively available to older homeowners is a reverse mortgage.

A reverse mortgage can help retirees improve cash flow in two ways: it eliminates monthly mortgage payments, and it also allows homeowners to access their equity in the form of cash payments.

If this sounds like an appealing option for you, we will cover everything you need to know in this Massachusetts reverse mortgage guide.

What is a Reverse Mortgage?

A home equity conversion mortgage (HECM) is the most common type of reverse mortgage. A HECM reverse mortgage is a loan only available to homeowners who are 62 years of age or older that is borrowed against the equity that homeowners have built up in the home like a home equity loan or home equity line of credit (HELOC).

When a homeowner takes out a reverse mortgage, the reverse mortgage proceeds will first go toward paying off the current forward mortgage, if there still is one.

For the remaining proceeds, the homeowners will have several choices for how they can receive their funds: a lump sum payment, monthly installments, a line of credit, or a combination of those choices.

One major difference between a reverse mortgage and a traditional mortgage, as well as a home equity loan or HELOC, is that it is not paid back in the form of monthly payments. A reverse mortgage is paid off when the homeowners decide to no longer live in the home full time, to sell the home, or when the last remaining homeowner passes away.

HECM reverse mortgages are federally backed loans. They are insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD).

Massachusetts Reverse Mortgage Requirements

Another way that a reverse mortgage is different from a traditional mortgage is that it comes with very specific requirements that must be met in order to both apply for a reverse mortgage and keep a reverse mortgage.

These requirements include the following:

Homeowners must meet an age requirement. For reverse mortgages, this means that at least one homeowner must be at least 62 years old.
Homeowners must meet a residency requirement. This means that homeowners must live in the home as their primary residence, which means that they must live in the home the majority of the year. This also means that secondary homes do not qualify for a reverse mortgage loan.
Homeowners must meet an equity requirement. There is not a specific amount or percentage of equity you need to have in order to qualify for a reverse mortgage, but you will need to have some equity built up in the home.
The home itself must meet certain conditions. This means that the home needs to be in good, maintained condition. Homeowners will need to be able to continue to maintain the home after receiving the reverse mortgage.

The homeowners must also be able to meet certain financial obligations. This means that homeowners must be up to date on property taxes, homeowner’s insurance, and any HOA fees, if required. And they need to be able to continue to cover those costs once they obtain the reverse mortgage loan.
The property itself must also meet FHA requirements, which means that it needs to be a single-family home, a two-to-four-unit property in which the homeowners live in one of the units, an approved condominium, or an approved manufactured home.
One requirement that must be met in order to apply for a reverse mortgage is the homeowners must attend a counseling session with a third-party HUD-approved counselor.

Massachusetts Reverse Mortgage Types

While the most common type of reverse mortgage is the home equity conversion mortgage (HECM), there are four major types of reverse mortgages that Massachusetts homeowners may qualify for, including the following:

Home Equity Conversion Mortgage (HECM)

The HECM reverse mortgage, also known as HECM loans, is the most common type of reverse mortgage offered by the majority of lenders, including Mutual of Omaha Mortgage. These reverse mortgages are backed by the federal government. They are exclusively available to borrowers who are 62 years of age and older. In this guide, we will focus on these specific types of reverse mortgages. There are no restrictions on how these reverse mortgages can be utilized. However, there is a lending limit imposed by the FHA. As of 2024, the current limit stands at $1,149,825.

Jumbo Reverse Mortgage

Jumbo reverse mortgages are proprietary reverse mortgages that enable homeowners to borrow amounts exceeding the FHA lending limit of $1,089,300. These reverse mortgages are customized by individual lenders and do not have the backing of the FHA. While jumbo reverse mortgages generally have higher interest rates, they do not necessitate mortgage insurance premiums.

HECM for Purchase

A Home Equity Conversion Mortgage for Purchase (HECM for Purchase) is a federally backed financial tool that enables homeowners to partially finance their new home using a reverse mortgage. This is accomplished by combining it with a substantial down payment from the sale of their previous home. As a result, older homeowners can comfortably upsize or downsize during their retirement years without the burden of monthly payments.

Single Purpose Reverse Mortgage

Single-purpose reverse mortgages, also referred to as property tax deferral programs and deferred payment loans, are the least common type of reverse mortgage. These specialized programs are exclusively offered to homeowners who are at least 62 years old. Unlike other types of reverse mortgages, single-purpose reverse mortgages have a specific purpose approved by the lender, typically limited to home improvement projects.

Massachusetts Reverse Mortgage Borrower Rights

Given that HECM reverse mortgages are backed by the federal government means that these loans come with several protections for consumers. Massachusetts has also passed its own laws to add additional protections.

Here are some of the protections that you can expect:

Cooling off Period

Massachusetts reverse mortgage applicants are required to take a 7-day cooling off period after a loan commitment letter is signed.

Right to Cancel

The federal government gives reverse mortgage applicants the right to cancel at any time during the application process including within three business days after signing the closing loan documents.

Counseling

Before a reverse mortgage application may be filed with a lender, all applicants are required to complete a counseling session with a third-party HUD-approved counselor. The purpose of this counseling session is to ensure that potential borrowers are fully informed of how a reverse mortgage works, potential alternatives, and to ensure that borrowers are not being forced into a reverse mortgage by would-be scammers.

This counseling session can typically be completed over the phone, video call, or in person.

Massachusetts Reverse Mortgage Calculator

The amount of money you are able to receive from a reverse mortgage is dependent on three primary factors: the age of the youngest borrower, the market value of the home, and current interest rates.

To receive an estimate of how much you may be able to receive from a reverse mortgage, we recommend using our reverse mortgage calculator.

Note: The numbers provided by the reverse mortgage calculator are only an estimate. To receive more accurate numbers, we recommend talking to one of our experienced reverse mortgage loan officers.

The Massachusetts Reverse Mortgage Loan Application Process

The reverse mortgage application process is not quick. It can take up to 45 days to complete. If you are seriously considering a reverse mortgage, it’s best not to delay starting the application process.

One benefit of a reverse mortgage is that you have the option to cancel the application at any time. This includes within three business days after signing the closing loan documents.

Here is the application process that you can expect if you work with Mutual of Omaha Mortgage:

Step 1: Talk to Reverse Mortgage Loan Officer

To get started, meet with one of our reverse mortgage loan advisors. They will evaluate your situation, give you an estimate of the benefits you could receive, and answer any questions you may have. Our team of Mutual of Omaha Mortgage loan specialists will guide you through the entire process.

Step 2: Counseling

After reviewing your finances with your reverse mortgage advisor, you will need to attend a counseling session with a HUD-approved counselor. This session is designed to educate you about the features of reverse mortgages, their suitability for your situation, and other financial options available to you. Once you have completed the counseling session, the counselor will provide you with a certificate. This certificate must be presented to your advisor before you can officially submit your reverse mortgage application. This important step ensures that you are making an informed decision.

Step 3: Submit Application

Once you receive the counseling certificate from your counseling session, your reverse mortgage loan advisor will help you submit your application and required documentation. This will typically include a photo ID, homeowner’s insurance policy, and property tax bill. Gathering these documents at this stage will speed up the loan closure process.

Step 4: Order Appraisal and Other Information

After you submit your application, Mutual of Omaha Mortgage will promptly order a comprehensive home appraisal to assess both the condition and market value of your home. This crucial step plays a vital role in determining the loan amount you are eligible for. Additionally, we will also initiate the ordering of a title and credit report to thoroughly examine any potential liens and evaluate your overall financial health. Rest assured, this meticulous process typically takes approximately one to two weeks to complete, ensuring a thorough evaluation of all necessary information.

Step 5: Processing and Underwriting

After you submit your application and documentation, the manual underwriting process commences. During this stage, the underwriter meticulously verifies that all reverse mortgage requirements are satisfied and evaluates whether the loan should be approved. If necessary, the underwriter may ask for additional documentation or home repairs to be completed before finalizing the loan. Your reverse mortgage loan advisor will promptly inform you of any actions that need to be taken.

Step 6: Closing

Once your application is approved, we will schedule a closing date. You will have the choice to sign the closing documents either at home with the help of a mobile notary service or in person at the title company.

Step 7: Start Receiving Funds

After signing the closing documents, there will be a required waiting period of three business days before the funds are distributed according to the chosen method(s) during the application process.

Find a Massachusetts Reverse Mortgage Loan Officer in Your Area

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

You can also find a Massachusetts 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:

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