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Older New Jerseyan's Reverse Mortgage Income Program


Older New Jerseyan's Reverse Mortgage Income Program

The New Jersey Housing & Mortgage Finance Agency (HMFA) is offering an FHA-insured program that allows seniors to access the equity in their home. This government insured loan is sometimes referred to as a reverse mortgage or home equity conversion loan (HECM).

Who Qualifies?

  • To qualify for this program, the homeowner or joing homeowners must be at least 62 years old and either own a home free and clear, or pay off any existing balance from the HMFA Equity Income Program.
  • Only the principal residence qualifies.
  • Borrowers must attend one free information session before making an application.

What Can The Program Do?

  • Homeowners can arrange to receive monthly payments to supplement Social Security and other retirement income.
  • You can also choose special cash amounts for specific needs.

When Is The Loan Due?

  • No payments are made as long as you live in the house.
  • The cash distributed from the equity is due when the seniors move from the house, or otherwise leave the house for more than 12 consecutive months.

How Is The Loan Paid Back?

  • The seniors or their estate repays only the cash and interest advanced. Teh remaining money belongs to the heirs.
  • If the heirs of an estate wish to keep the home, they may choose to pay off the loan from another source such as securing a new mortgage.

How Does the HMFA Equity Income Program Differ From A Bank Home Equity Loan?

  • With traditional "home equity loans" or line of credit you must make monthly payments and you must have an income that would qualify you to make these payments.
  • Repayment of an HMFA Equity Income Loan is not due as long as the house remains your principal residence.
  • With the FHA-insured HMFA loan you cannot be foreclosed or otherwise forced to vacate your house. However, you are required to make repairs to your house and pay your real estate taxes.

Can You Outlive The Loan?

  • No! You cannot outlive the loan agreement.
  • The U.S. Department of Housing and Urban Development (HUD) guarantees the loan -- no debt will ever be passed along to the estate or heirs.

Will You Still Have An Estate To Leave Your Heirs?

  • The remaining equity in your home is passed on to your heirs. No other assets can be touched or affected by this loan.
  • No debt will ever be passed along to the estate or heirs.

What Is The Catch?

  • Every borrower is required to receive free counseling by a HUD-approved housing counselling agency.
  • Counselling focuses on the different types of home equity conversion mortgages available, the suitability of the mortgage for your needs, and alternatives to a home equity conversion mortgage.

How Do I Apply for an HMFA Equity Income Mortgage?

  • Apply directly to the NJ HMFA after talking to a HUD-approved counselor. Call New Jersey HMFA for a list of counselors at: 1-800-NJ HOUSE.

How Much Can I Borrow?

  • The principal limit is based on:
  • the age of the youngest borrower;
  • the expected average mortgage interest rate;
  • the maximum claim amount.
  • The maximum claim rate is set at the lesser of:
  • the appraised value of the house; or
  • the maximum principal amount for a one-family dwelling that can be insured by FHA. Currently the maximum ranges in New Jersey are between $99,250 and $151,725 depending on county.

How are the Loan Proceeds Paid to the Borrower?

  • The borrower can choose one of four different plans:
    1. Tenure Plan -- the borrower receives equal monthly payments for as long as they occupy the principal residence.
    2. Term Plan -- the borrower receives equal monthly payments for a fixed period determined by the borrower.
    3. Line of Credit -- the borrower receives the mortgage proceeds in unscheduled payments or in installments, at times and in amounts of the borrower's choosing until the line of credit is exhausted.
    4. Modified Term or Tenure -- the borrower receives monthly payments and has access to a line of credit. The line of credit can be drawn on until it is exhausted. The monthly payments continue for the life of the loan.

Who Pays the Taxes and Insurance?

  • Unless specifically requested, escrow for taxes and insurance will not be held by the loan servicer. The borrower is still responsible for paying real estate taxes, insurance and seasonal maintenance.

This fact sheet is for information purposes only and does not constitute an offer. Details are subject to change. For more information and an application, call:

New Jersey Housing and Mortgage Finance Agency

For more information on Reverse Mortgages, see Facts for Consumers from the Federal Trade Commission: Reverse Mortgages.

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