Frequently Asked Questions About Reverse Mortgages

The Reverse Mortgage is a program available to homeowners age 62 and older that provides access to your home’s value without having to make a monthly mortgage repayment. You must continue occupying your home as your primary residence and continue paying your property taxes and homeowners insurance. The most popular Reverse Mortgage program is called the HECM which stands for Home Equity Conversion Mortgage and is insured by the FHA (Federal Housing Administration).

The loan becomes due when you no longer live in the property. You or your estate may pay back the loan by either selling the property, or refinancing the mortgage. Because a Reverse Mortgage requires no monthly payments, this allows your estate a one year period to either sell the home or to refinance the loan when the loan becomes due. For Example: Let’s assume someone takes out a Reverse Mortgage and owes $50,000 after 5 years. Then, the homeowner passes away and the estate sells the house for $250,000. The lender gets $50,000 and the estate inherits $200,000.

The loan becomes due when you sell the property or no longer occupy your home as your primary residence for a period of 12 months or longer, or you fail to maintain the property taxes and homeowners insurance. The loan also becomes due when the last surviving borrower passes away. Generally, your estate has up to six months to refinance your home if they choose to keep the house, or up to 12 months if they decide to sell.

First, the loan is a contract. As long as one of the original borrowers lives in the home, pays the property taxes and pays the homeowners insurance, they can never be forced to move. Second, if any of the lenders go out of business, the government guarantees that the homeowner will receive whatever money is still due to them. Lastly, as you know, you are deferring the payment for the Reverse Mortgage until the future. The government guarantees that if you ever owe more than what the house is worth, the homeowner or their estate would not be responsible for the deficiency. This guarantee is unique to the Reverse Mortgage. Regular mortgages do not offer this same protection.

While the Reverse Mortgage allows you to age-in-place and has no recourse, you are spending a portion of the inheritance you will leave to your heirs. With the changing of people’s life expectancies, people no longer work until they are 62 and then pass at 70 leaving an estate with a paid off mortgage for their heirs. Now, people are living longer and need an additional source of income to help fund their retirement as Social Security is not equipped to fulfill all their needs.

Yes, we have a number of clients that use the Reverse Mortgage to pay off their current mortgage. Reverse Mortgages are designed to eliminate the burden of making monthly mortgage payments. This creates positive cash flow. Reverse Mortgages protect the borrower from foreclosure due to non- payment, because there are no payments required.

To qualify for a Reverse Mortgage, you must: Be at least 62 years old, Occupy the property as your primary residence, Pay off any existing mortgages at the time of settlement, and Attend a HUD-approved housing counseling session.

You can use the money for any reason! Some of the most common uses include:Paying off an existing mortgage or other debt
– Doing home improvements
– Purchasing long-term health care or paying for in-home care
– Supplementing income, helping family members, traveling

The amount of money you receive depends on three factors:
– your age
– the appraised value of your home
– the current interest rates

The amount of money you receive depends on three factors: the younger homeowner’s age, the appraised value of your home and the current interest rates.

If you have a current mortgage, that must be paid off first. Any remaining money is yours to use however you wish. If you do not have a mortgage, there are no restrictions on how the money can be used.

No, the lender will not own your home. Just like any other mortgage, with a HECM your name remains on the title. You still own your home.

You are required to pay the property taxes and the homeowners insurance as well as any homeowner’s association dues, if applicable. Also, the lender expects you to continue to occupy the property.

Yes. While a Reverse Mortgage does not require regular scheduled monthly payments, the program does permit a borrower to make payments if they choose. There is no penalty for paying down or off your loan at any time.

There is no credit score requirement. However, we will look at credit history as part of the underwriting process to ensure your ability to pay your property taxes and homeowners insurance.

Mortgage loans generally require a credit review. A benefit with the HECM is that there is no minimum required credit score. We review your credit to determine if you are able to meet your financial obligations such as paying property taxes, homeowners insurance, and home maintenance costs.

No, you cannot lose your home for living longer than expected.

All remaining equity will go to your heirs after the balance of your Reverse Mortgage is paid. In my experience, this is most often the case. One of the forms we provide you is an amortization schedule that shows you the principal balance of your loan, year by year. The amount of remaining equity depends on such variables as such as how much money you draw, how long you stay in your home, your home’s appreciation, your home experiences, and interest rates.