What is a Reverse Mortgage?
A Reverse Mortgage is a loan that affords seniors, 62 or older, the benefit of converting the equity in their home into money without making monthly payments, giving up title to the home or selling the home. The proceeds are received as a one time lump sum payment, a line of credit, tenured monthly payments or a combination of these options. Because you are using your own homes equity, the money is tax free. The percentage of equity made available to you depends largely on your age, the current interest rates and the value of your home, so the older you are and the more your home is worth, the more money will be available to you.
What are the advantages of a Reverse Mortgage?
You can stay in your home-You retain title of your home and can remain in it.
No monthly mortgage payments-You will not make any monthly mortgage payments or have to repay the loan until you move out of the house.
Independence-The Reverse Mortgage will allow you extra money to help with expenses. Such as home repairs,Traveling, and health care needs.
Flexibility– The money from a Reverse Mortgage is available for anything that you would like to spend it on.
What Reverse Mortgage products are available?
There are two types of Reverse Mortgages:
Home Equity Conversion Mortgages{ HECM}-These loans are insured by the U.S. Department of Housing and Urban Development[HUD]. These are the most common type of reverse mortgages and offer the benefits of no monthly payments, no income or credit requirements, and unrestricted use of the proceeds of the loan and flexible withdrawal options.
Proprietary Reverse Mortgages– These are loans that are given from private lenders and have unique features depending on the lender that is issuing the loan. These features include items such as higher loan amounts than the HECM loans. The unique ability to lend on property types such as co-ops and the ability to lend when the property is held in unique types of trusts.
What can I use the money for?
There are no restrictions on how you choose to spend your money. Therefore, it can help you with daily living expenses, home improvements, medical expenses, or you can take that trip you have always dreamed about. Maybe you just want to save the money and enjoy the piece of mind of being financially secure.
Is Counseling required?
Yes, all products require counseling to ensure you are clear on how the mortgage works and that you have selected the reverse mortgage that is best for your needs.
Does the reverse mortgage have to be on my primary residence?
Yes, Reverse Mortgages are only available for your primary residence.
Do I need to make monthly payments on my Reverse mortgage?
No, You do not make monthly payments to the reverse mortgage lender. However you still are responsible for paying the property taxes, insurance and upkeep of the home.
When does a Reverse Mortgage get repaid?
Reverse mortgages must be repaid, frequently called the maturity event, when one of the following conditions occurs[a] you sell the home[b] the home is no longer your primary residence [c] the borrowers fail to live in the house for 12 consecutive months because of illness [d] all the borrowers pass away.
Do I need good credit to qualify?
No, credit and income are not used to qualify for this loan. Only the age of the borrower, property value and the current interest rate are used to determine the amount of loan available. If there is an existing mortgage or judgements against the property, they will have to be paid off at the time of closing. All other credit card and installment debt can remain open.
What options are available for me to receive the money from the Reverse Mortgage?
There are many options for receiving your money. First, you may take the money as a lump sum. This is beneficial if you need all the money immediately, but will not allow for access to any money in the future. Another option is to set up a credit line. This will allow you to withdraw money using a checkbook up to a predetermined limit. This is advantageous if you do not have a need for the money now but foresee the need in the future. Interest does not accrue on the money that you have not withdrawn. Yet another option is to elect for a tenure payment. This option will give you a guaranteed monthly payment for as long as you are living in the house. Lastly it is possible to set up a combination of all three options.
Will the lender own my home If I take a Reverse Mortgage?
No, The title to the home will remain in the borrowers name throughout the duration of the loan.
Are there tax consequences to getting a Reverse Mortgage?
Because Reverse Mortgages proceeds are considered loan advances and not income, they are not taxable.
Will my Social Security, Medicare, and Medicaid benefits be affected?
A Reverse Mortgage should not have any impact on your Social Security or Medicare benefits. However, if you receive SSI, Medicaid or other public assistance, the money you receive from a Reverse Mortgage can be considered a liquid asset if it is in an account at the end of the year. You must be careful not to let your liquid assets exceed the limits of the programs that you participate in. You should consult with a medicare and medicaid advisor.
Are my other assets or estate at risk with a Reverse Mortgage?
No, Reverse Mortgages are non-recourse loans meaning that the lender is only entitled to repayment from the equity in your home and not your other assets [or your heir’s assets] regardless of the payoff amount on the loan.
Can I do a Reverse Mortgage on a condo,townhouse or coop?
Yes, Reverse Mortgages are also available for homeowners of Condo’s, Coops, and 1 to 4 family homes.
What are the closing costs?
Closing costs vary depending on the loan product you select. In some cases, the closing costs are paid by the lender. If you choose a mortgage in which closing costs apply, the costs will be typical to a regular forward FHA mortgage. Closing costs include but are not limited to: Appraisal,credit,title charges,recording fees, and points. A good faith estimate will be provided to you that details all the costs associated with obtaining a mortgage.
How much of a Reverse Mortgage do I qualify for?
The amount of money available from a Reverse Mortgage depends upon the borrowers age, the value of the home and the interest at the time of origination.
My home is in a “Living trust” Can I still get a Reverse Mortgage?
Yes, In most cases, a homeowner who has put their home in a living trust can still obtain a Reverse Mortgage. The trust documents must be reviewed by one of the lenders attorneys to determine if there is anything that would be unacceptable.
My home is in a “Life Estate” Can I still get a Reverse Mortgage?
Yes, In most cases, a homeowner who has put their home in a life estate can still obtain a Reverse Mortgage.