How to Read a Reverse Mortgage Statement

A reverse mortgage statement, provided annually by your loan servicer, offers a comprehensive overview of your loan’s activity and current status. Unlike traditional mortgage statements that track payments made, a reverse mortgage statement reflects how your loan balance increases over time. Understanding this document is important for homeowners to monitor their financial well-being and track their home equity.

Key Sections of Your Statement

A reverse mortgage statement provides a clear snapshot of your loan. It includes an Account Summary, offering a high-level overview of your current loan balance and any available credit. This section acts as a quick reference point for the overall health of your reverse mortgage.

Loan Details include your loan number, property address, and lender or servicer contact information, important for inquiries. The statement also details Transaction Activity, an itemized list of all financial movements, including funds received, accrued interest, and fees.

Important Notices and Disclosures provide information about changes to loan terms or required actions. These sections often contain time-sensitive information that warrants careful review. Contact information for your loan servicer is always included, allowing you to reach out with questions or concerns.

Decoding Financial Figures

The “Principal Limit” represents the maximum amount you are eligible to borrow, based on factors like the youngest borrower’s age, home value, and current interest rates. This borrowing capacity can grow over time, particularly for adjustable-rate loans.

Your “Loan Balance” reflects the total amount owed, including disbursed funds, accrued interest, fees, and mortgage insurance premiums. Unlike traditional mortgages, this balance typically increases as monthly payments are not required. “Available Line of Credit” or “Available Funds” indicates the portion of your principal limit still accessible. For those with a line of credit option, this amount can increase over time, providing additional funds as needed.

“Accrued Interest” refers to the interest that has accumulated and been added to your loan balance, calculated monthly on the outstanding balance. “Service Fees” are charges by the lender for managing your loan, covering costs like sending statements and distributing funds, and these are often added to the loan balance. “Mortgage Insurance Premiums” (MIP) are fees paid to the Federal Housing Administration (FHA); an initial premium is paid at closing, and an annual premium is added to the loan each month.

“Draws” or “Disbursements” are the amounts of money you have received from your reverse mortgage, whether as a lump sum, monthly payments, or withdrawals from a line of credit. These reduce your available funds and contribute directly to your loan balance. The “Growth Rate” applies to the unused portion of a line of credit, allowing it to increase over time at a rate equal to the loan’s interest rate plus the annual mortgage insurance premium.

Analyzing Transaction History

The transaction history section of your reverse mortgage statement provides a chronological record of all activity on your loan. This detailed log allows you to see the sequence of events that have impacted your loan balance and available credit. Each entry is dated, helping you trace specific transactions.

You can identify different transaction types within this section, such as draws, the monthly accrual of interest, and the application of service fees or mortgage insurance premiums. Each type of transaction has a specific impact on your loan. For instance, draws increase your outstanding loan balance and reduce your available credit, while accrued interest and fees also increase the loan balance.

Understanding how each transaction type affects your loan balance is important for monitoring your equity. By reviewing this section regularly, you can reconcile the entries against your own records, ensuring accuracy and understanding the progression of your reverse mortgage. This consistent review helps you remain informed about your financial position relative to the loan.

Reviewing Important Notifications

Reverse mortgage statements often include important notifications that require your attention. One common notification is the Annual Occupancy Certification, which you must sign and return each year to confirm the home remains your primary residence. This HUD requirement helps ensure you continue to meet loan terms.

Statements also communicate changes in your loan’s terms, such as adjustments to interest rates, particularly for adjustable-rate reverse mortgages. Staying informed about these changes is important as they directly influence the growth of your loan balance over time. The statement will always provide contact information for your loan servicer, useful for addressing any questions or concerns.

Statements might include details about escrow accounts if your property taxes or homeowner’s insurance are managed this way. Understanding any escrow information is important for ensuring these property charges are handled correctly. Regularly reviewing these notifications helps you stay aware of your responsibilities and any evolving aspects of your reverse mortgage.