Reverse Mortgage Frequently Asked Questions & Answers
What is a reverse mortgage?
A reverse mortgage is a loan that enables senior homeowners, age 62 and older, to convert a portion of their home equity into tax-free proceeds (call this income or simply funds from your retirement). Seniors who qualify get to keep ownership of the home, can receive lifetime monthly income (or select from a credit line, or lump sum), and the main feature which makes reverse mortgages unique is that there are never mortgage payments due. Seniors have the ability to choose from a standard home equity conversion mortgage or a HECM Saver (which costs less but allows less equity to be borrowed), also there are fixed rates and adjustable rate options with this loan option depending on your borrowing needs. FHA (Federal Housing Administration) insures the program for both the lenders and consumers safety; the reverse mortgage also protects your heirs with a non-recourse feature which means they wont have to pay back the mortgage in case more is owed than what you borrow when it comes time to repay the loan (when borrowers pass away or decide to sell). The amount you can borrow with a reverse mortgage is based on your age, value of the home minus any mortgages, and current market interest rates (the older you are the more you can borrow).
What kinds of properties are eligible for a reverse mortgage?
Eligible properties for reverse mortgage include
- 1-4 unit homes
- FHA approved condominiums
- planned unit developments
- Mobile homes
- cooperatives are generally not eligible for a reverse mortgage
Non recourse protects you and your heirs, if for any reason the sale of the home does not cover the reverse mortgage loan, the difference will be paid by FHA’s mortgage insurance. When the loan becomes due/payable (when the borrowers pass away/sell the home), a portion of your reverse loan will be paid with the sale proceeds of the property, and the difference will be paid via FHA’s insurance. Therefore there is never a risk of paying more than the value of the home, even in extreme cases where property value dramatically decreases substantially. This is one of the unique positive features of the HECM reverse loan;Your grown kids/heirs/estate can sleep easy at night knowing that this is your debt/mortgage and that if for any reason the home is worth less than the debt – they are not obligated to pay anything out of pocket and it does not negatively impact their credit scores either.
How does a reverse mortgage differ from a home equity loan or a HELOC?Here is a comparison of the three programs
1.) Credit scores and income are required for HELOC and home equity loans– not true with the HECM reverse where income/scores are not a factor to qualify.
2.) No age requirement for the HELOC or home equity loan– this is not the case with the reverse mortgage you must be 62 to qualify.
3.) All have risk of foreclosure if no payment is made on property taxes or insurance.
4.) HELOC’s or home equity loans have a mortgage payment required while the reverse mortgage does not. While with all options you can borrow from your equity the HECM reverse is the only which can be done without any further payments in your retirement.
How does a reverse mortgage differ from a refinance?
The main difference is that with a reverse mortgage you can borrow from your equity without having income/credit score qualifications to meet and most importantly without having a monthly payment due. Both programs are used to release equity – for seniors over the age of 62 the reverse mortgage is an option if you want to retire in your home and not have to worry about payments.
How can Reverse Mortgage Lenders Direct help me get the best reverse mortgage?
We are not a lender/bank/broker – we are a smarter way for you to comparison shop top lenders nationwide who belong to our network – we have the ability to quickly/easily compare top lenders then match you to the best one (usually means locally present, good rates, low fees, and great reputation – not to mention has to be HUD approved lender). Seniors who go directly to these lenders don’t save money or time, instead they have to go and speak to many lenders and get many quotes – let us save you time and money by comparing the lenders first for free. Since we are not owned by a bank/lender we can give you unbiased advice if you have questions/doubts about the program.
What are the closing costs involved with the reverse mortgage, which portion has to be paid upfront?
Closing costs vary from drastically between different lenders, therefore we had created a free service for seniors who want to comparison shop HECM lenders to save time and money. We have some lenders in our network who offer a (no fee reverse mortgage) with the traditional HECM standard lump sum option.
The upfront costs are minimal for the reverse loan, borrowers are required to pay for the home’s appraisal which is right around $350-$450, those with mobile homes need to pay for further inspections. The main closing costs or fees which you will incur are added onto the loan and you are not required to pay these costs upfront to secure a reverse mortgage. The costs include the following (fees are very similar to a traditional forward mortgage refinance).
Counseling fee ($100-$150 paid by borrower upfront)
Appraisal ($350-$450 paid by the borrower upfront)
Title insurance (varies by state and with property value)
Title settlement
Title search/exam
Recording
Delivery/courier
Payoff (if a mortgage is being paid off)
Notary
Doc prep
Appraisal
Wire Fee
Flood Cert
Credit Report
Interest charges
If you wish to lower the upfront costs of a reverse mortgage, you may also wish to consider a ‘HECM Saver’, which reduces the upfront MIP (mortgage insurance premium) to only .01% instead of 2%. The HECM Saver is ideal if you want to borrow a smaller amount than the balance that would be available with a HECM Standard loan, as well as lower the upfront loan costs. The great part of a reverse mortgage is, as long as you keep up with our basic requirements, you will never be asked to pay these costs until you sell or leave your property.
Is counseling mandatory or optional?
Yes, reverse mortgage counseling is a requirement of the process. The purpose of this counseling is to make sure that you understand all that the loan entails, and to make sure that you were not coerced into doing it. The counseling is done by a third party government agency, not the lender themselves.
What is the HECM Saver option - how is the HECM Saver differ from Standard HECM loan?
Launched in October 2010 the HECM Saver allows for senior homeowners to enjoy all the benefits of a traditional reverse mortgage at significantly reduced upfront costs. This new reverse mortgage product nearly eliminates one of the biggest upfront fees that you were previously required to pay. HECM Saver will have an upfront premium of only .01 percent of the property’s value compared to the traditional reverse mortgage upfront MIP premium of 2%. The HECM Saver is ideal if you want to lower the upfront loan costs and if you don’t need as much of the home’s equity as with the traditional loan (with a HECM saver you are allowed to borrow a smaller % of the homes available equity). The amount of equity you can borrow with thhe HECM Saver is usually around 8-17% lower than with the traditional HECM program.
example of savings: On a $200,000 loan the MIP premium paid upfront on the HECM Saver loan is $20 – compared to $4000 for the HECM Standard. Those who have a mortgage balance and dont have significant amount of available equity will be most likely have to utilize the standard program.
How can I receive the payments from my reverse mortgage?
You are in full control, the amount you borrow to how you receive these funds is completely up to you, any portions which are not borrowed belong to you – and any future equity (if value increases) also belongs to you.
1.) Lifetime monthly income
2.) Credit line – where you only pay interest on the portion borrowed
3.) Lump sum – receive the max as an upfront lump sum
There are 6 different payment options – All of these options are available to all reverse mortgage borrowers.:
* Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
* Term – equal monthly payments for a fixed period of months selected.
* Line of Credit – unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted. You only pay interest on the acutal amount you borrow from your credit line – any unsued portion grows at a determined rate similar to how a CD account works (the credit line cannot be frozen/cancelled even if home values drop).
* Modified Tenure – combination of line of credit plus scheduled monthly payments for as long as you remain in the home.
* Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
* Lump Sum- the borrower takes out the full loan amount at one time. With this option, the borrower will receive a fixed interest rate for the term of the loan.
If one spouse is not yet 62, can we still get a reverse mortgage?
One requirement about the HECM loan is that at-least one borrower must be 62 years of age to qualify– so that if one borrower is not 62 they need to be taken off the home’s title. There are risks to remove your spouse from the title while getting a reverse, as if the to the homeowner who is 62 passes away the reverse loan would come due and payable in 12 months time (if the borrower passes or decides to sell the loan becomes payable in full). Hence there is risk since the other spouse would have to wait until they can be put on the reverse mortgage, that time-frame if many years can be risky in case anything happens to the borrower on the loan. Consider all of your options before making this decision if both borrowers are not over the age of 62.
What is the difference between the different reverse mortgage lenders?
HECM lenders all have the same reverse mortgage programs, are governed by the same federal rules and organizations, with really the only major difference being how they price their loans (based on interest rates charged and fees to consumers).
If all reverse mortgages are essentially the same how can I get the best deal? This is where our free service comes in, we are able to comparison shop top lenders, comparing them to find you the best loan to suit your needs. If you have questions or concerns we can help you, in an unbiased way, since we are an independent company.
If all reverse mortgages are essentially the same how can I get the best deal? This is where our free service comes in, we are able to comparison shop top lenders, comparing them to find you the best loan to suit your needs. If you have questions or concerns we can help you, in an unbiased way, since we are an independent company.
What risks are the risks of taking a reverse mortgage - are HECM loans safe for seniors?
A reverse mortgage is a very safe loan – it is insured by HUD and has been in mainstream use for over 22 years (been around since 1961). The program has evolved over the last decade to better suit the needs of seniors (mainly reducing costs, adding more protection/insurance for seniors/heirs, and increasing options) – now there are roughly 100,000 seniors every year using a reverse loan to better improve their retirement. The FHA insurance protects the borrowerif the lender goes out of business or if the loan grows to more than the value of the home (also protects the heirs in that case). You will always remain on title and will own the home (not the bank) until the loan becomes due, which is normally when the last remaining borrower leaves the home permanently.
The majority of the press focused on the negative news of a few seniors who could no longer afford their homes taxes/insurance: as long as you are able to continue to pay your home insurance and your property taxes, and abide by all the terms of the loan, there is very little risk with a reverse mortgage since it is governemnt insured. Instead of a making a risky financial investment, a reverse mortgage is allowing you to reap the benefit of all that you have invested into your home. This program was designed specifically to help seniors gain financial stability, so it was made with the least risk as possible. A reverse mortgage can decrease your expenses by paying off your existing mortgage and other debts, and also increase your cash flow by giving you monthly payments, thus reducing your risk of defaulting on any other responsibility.
The majority of the press focused on the negative news of a few seniors who could no longer afford their homes taxes/insurance: as long as you are able to continue to pay your home insurance and your property taxes, and abide by all the terms of the loan, there is very little risk with a reverse mortgage since it is governemnt insured. Instead of a making a risky financial investment, a reverse mortgage is allowing you to reap the benefit of all that you have invested into your home. This program was designed specifically to help seniors gain financial stability, so it was made with the least risk as possible. A reverse mortgage can decrease your expenses by paying off your existing mortgage and other debts, and also increase your cash flow by giving you monthly payments, thus reducing your risk of defaulting on any other responsibility.
Is there a credit score or income requirement in order me to qualify?
There are currently no income or credit scores required for seniors who are interested in accessing the home’s equity through the reverse mortgage loan. One reason to this is that there are no monthly mortgage payment obligation thus the lender does not take income/credit as a qualifying factor. There has been industry news about this changing in the near future but as of today there are no definitive requirements such as credit or income (the main difference between a reverse mortgage and other programs is this no income or credit needed).
Can I get a reverse mortgage to avoid bankruptcy?
Yes you can, we have many successful cases of seniors who were facing large amounts of personal debt qualify for a reverse and use the proceeds to pay off all debts to avoid a BK. The key here is being eligible and having sufficient equity in the home to cover all of the debts. The reverse mortgage is not free – so do review the costs – give yourself enough time to compare lenders don’t rush into one just because you are feeling the pressure from your debts. The interest rate on ther HECM should be substantially lowered then the one on your debts so this should be a wise financial move.
Can I lose my home with a reverse mortgage - how would this happen exactly?
This is possible – you are required to pay for the homes property insurance and taxes – therefore if no payment is made over a prolonged period of time this could lead to a technical default thus you being at risk of losing the home (this can happen to anyone who does not pay the home’s taxes or insurance) not only for a reverse mortgage. You remain title holder of the property, can live in the property until your or both borrowers pass, and when the loan comes due (when you sell the home – or both borrowers pass) the estate has up to 12 months to deal with how to best pay back the loan (remember the non-recourse feature which means your heirs or estate are not responsible for any amount over the value of the home- the FHA insurance pays any difference if the home is not worth as much as the loan).
Does the reverse mortgage void inheritance?
The reverse mortgage does not in any way void your heirs inheritance, besides the fact that as you are borrowing equity from the home with the reverse mortgage, naturally there will be less equity for your heirs compared to not taking a reverse mortgage or any loan for that fact. As the heirs if you want to keep the home after your parents pass you are able to choose how to pay off the reverse mortgage – your options will include refinancing the mortgage – paying off with your own money – or simply selling the home and keeping any profits. The heirs are not responsible if the home cannot cover the value of the laon upon the borrower passing away.
Are reverse mortgages available for mobile homes (manufactured homes) - what are the property requirements?
Yes your property will qualify if it was built after June 1976, must be 400 sq feet, be on a permanent foundation – and the home could have only be moved once (from the dealership to the permanent location). All manufactured homes will also require a foundation inspection as part of the loan process besides from the traditional FHA appraisal.
Are there any restrictions of reverse mortgages if so what are they?
1.) There are no restrictions on how you use the funds – none – you can spend the money as you wish.
2.) All persons must be 62 or older (home title)
3.) The property must be your primary residence (like in the home for more than 6 months)
4.) You are required to maintain the property in good shape – you must pay for the homes taxes & insurance
2.) All persons must be 62 or older (home title)
3.) The property must be your primary residence (like in the home for more than 6 months)
4.) You are required to maintain the property in good shape – you must pay for the homes taxes & insurance
If I get a reverse mortgage will I ever be able to refinance afterwards?
Yes, you are able to refinance or take out a reverse mortgage in the future – the most important point to make here is that you will need enough equity in order to qualify. The reverse mortgage should not be taken out light or with a short term perspective, the loan can be taken out for short term benefits we would recommend the Saver loan for short term perspectives.
Do I have to own my home free and clear in order to get a reverse mortgage?
This is not a requirement to have your home completely paid for before being able to get a reverse mortgage – the important point to make here is that it will depend on your available equity/age/home value. If you have an existing mortgage then we need to make sure you have sufficient equity available to cover paying off your current mortgage along with any closing costs. The reverse mortgage has pre-determined amounts that one is able to borrow which is usually between 50-70% of the homes appraised value, this means that you are not going to have access to 100% of the homes equity thus having a mortgage can sometimes disqualify you if there is not enough equity to cover the pay-offs.
Will I still own the home/title to my home after I receive a reverse mortgage?
You will always maintain ownership with a reverse mortgage, you always maintain title ownership to the home and no the bank – that is a misconception/myth about the program. The lender does not take ownership of the home in the reverse mortgage process. You continue to hold title after getting a reverse mortgage and until you or your heirs choose to sell the home. The HECM reverse is a loan, which allows you to borrow some equity, and is due and payable when the borrowers decide to sell or pass away, it is in no shape or form a way for the bank to take your home. When the borrower’s pass away the home goes to the estate/heirs and they can sell it for a profit or pay off the reverse mortgage via cash/refinancing to keep the home in the family if desired.
What if I get a reverse mortgage and the property value increases?
Any increase in value will increase your equity ownership – remember you keep ownership of the home (not the bank) and this means any existing or future equity belongs to you. The home will increase in value which will offset your borrowing costs, overall the expectation is that as the home increases in value (so will the loan because there are no payments mande so the interest will build up) to where the end result is break even in growth of home’s value minus any borrowing costs involved due to interest charges. Real estate markets are unpredictable but any gains in value/equity will belong to your pockets and not the lenders.
Can I rent a room in my home and still have a reverse mortgage?
Yes, you are able to rent out a room, the eligibility requirements are that all named persons on the title of the property be 62 years or older, you must use the home as your primary residence and you are required to own the property or have a mortgage that leaves enough equity remaining once it has been paid off (you must pay for the homes insurance & taxes). Renting out a room can add extra income which is crucial in a fixed income, with a reverse mortgage you maintain ownership of the home not the bank.
How long does the reverse mortgage process take from start to finish?
On average the lenders we work with can close a reverse mortgage loan and give you the proceeds within 30-40 days from the start of the application. This is a decent time-frame to give yourself to secure the loan, you should start using our service roughly 2 months before needing the funds to allow ample time to comparison shop lenders (so you can receive the best HECM loan).
Some of the major steps along the way included:
0.) fact finding/research
1.) starting the application
2.) ordering the HUD counseling session
3.) ordering the FHA approved appraisal
4.) processing
5.) underwriting
6.) Closing
7.) disbursement
Some of the major steps along the way included:
0.) fact finding/research
1.) starting the application
2.) ordering the HUD counseling session
3.) ordering the FHA approved appraisal
4.) processing
5.) underwriting
6.) Closing
7.) disbursement
What are the interest rates on reverse mortgage? Are they fixed or adjustable? Do they tend to fluctuate a lot? Is there a cap on how high the interest rate can be?
Reverse mortgage lenders make money off the interest rates they charge you, while with the reverse mortgage there are never any mortgage payments, the interest rate which the lender charged for the loan is accruing onto the principal which is the amount you borrower thus always increasing your loan obligation. in 2012 interest rates have hit all time low’s due to the Fed’s decision to help the mortgage market and to allow for more homeowners to take advantage of low rates (refinance – reduce payments – or to take reverse mortgages). When rates are at all time low’s there is only one direction they can head from here and that is up – which is bad news if you are thinking about waiting or do not qualify at this time. For those who do qualify right now is the best time to borrow a reverse mortgage based on low rate environment.
Reverse mortgage interest rates are based on the Monthly LIBOR (London Interbank Offered Rate) index – this is a standard index used in the U.S. for many financial transactions.
HECM reverse mortgages come with fixed rates as well as adjustable rates, it is completely up to you to choose which one you want/need. A fixed interest rate is only available if you take a lump sum payment. If you choose a monthly amount or open a line of credit, these options are only available on a variable rate. The interest rate you will be offered is based on market rates at the time your loan closes. Reverse mortgage companies are all federally regulated and offer the same programs but they do not offer the same interest rates/closing thus – hence we created an easy way for seniors to comparison shop these lenders to receive the best reverse loan.
Is the interest on my reverse mortgage loan tax deductible?
Interest on your loan is tax deductible only when you repay your loan, this is when you either decide to sell the home or when both borrowers pass. Since you do not make payments on the loan every month, you are not continuously paying interest on your loan, so you cannot deduct it from your taxes throughout the term of the loan. Once the loan matures and is repaid by either you or your heirs, the interest will be available to be used as a tax deduction.
What is Mortgage Insurance Protection (MIP)?
Mortgage insurance premium (MIP), equal to 2 percent of the maximum claim amount or home value, whichever is less – with the HECM Saver this is .01%. There is also an annual premium thereafter equal to 1.25 percent of the loan balance. You will not need to pay the MIP out of pocket it is included in the loan to be paid when you sell the home and or borrowers pass. The MIP adds a guarantee or insurance for both the lender and consumers – it protects lenders and your heirs if property values do not cover the loan costs allowing the FHA insurance to kick in to pay this difference, it protects seniors against freezing of credit lines or cancelling of payments (this won’t happen thanks to the FHA insurance). The HECM reverse mortgage is a governemtn insured product which over 2 decades in the market making it secure for seniors to enjoy in retirement.
Can I get a reverse mortgage on a condo?
Yes, as long as you meet all basic requirements and the condominium project is approved by HUD.
Can I sell my home after taking out a reverse mortgage?
Yes, you are able to easily sell your home without any sort of pre-payment penalties or fees from your reverse mortgage. The lender would expect a repayment of any finds borrowers and any current or future equity from the sale will belong to you.
Can you compare the decision of selling my home to borrow the equity compared to taking a reverse mortgage?
From the perspective of fees involved, selling your home is more expensive than taking out a reverse mortgage if you are planning on buying a home (transaction costs to sell/buy, broker fees will be higher than just doing a reverse). The reverse mortgage is mainly designed for those who wish to remain in the home for a their retirement years therefore if you are already planning on selling the home maybe you should first consider what your property goals are before paying for a reverse mortgage than paying fees to sell the home.
How do I know what the value of my home is for reverse mortgage?
You can begin by using free online services which give you a close estimate such as http://zillow.com, part of the process of getting a reverse mortgage is to order an appraisal by an FHA approved appraiser who will determine the value of the property.
How long do I have to live in my house before I can qualify?
There is no minimum requirements when it comes to the length of time you have lived in your property to qualify so you can take one as soon as you like or postpone the decision.
Is a HECM different to a reverse mortgage?
No, HECM is simply another name for a reverse mortgage; it is an acronym for Home Equity Conversion Mortgage (HECM), when you see/hear the tem reverse mortgage/HECM (pronounced heckum) just know that it means the same thing (95% of the reverse mortgage market are FHA insured HECM’s which can be referred by either name).
Does my health matter if I want to get a reverse mortgage?
No this is not a requirement as of 2012 to qualify, you do not need to have a check-up or meet any health requirements to get a reverse mortgage.
What is an appraisal and why is it important? Can I choose the appraisal company who values my property?
An appraisal is the process of formally finding out what the home is worth in today’s market, the research of the home or inspection will be done by an FHA approved appraiser.The Home Valuation Code of Conduct (HVCC) says that neither the lender nor the borrower may select an appraiser. Appraisers are assigned through a rotation at the Appraisal Management Company that is regulated by HUD (U.S. Department of Housing and Urban Development). If you happen to know your appraiser, you may request a different appraiser through your lender.
How much money can I get from the HECM reverse mortgage?
The total amount of reverse mortgage funds available depends on several factors including the age of the youngest homeowner, the type of reverse mortgage selected, current interest rates, the appraised value of your home and FHA lending limits for your area. The older you are the more funds you can receive, also the more equity you have the more you can receive. You should then receive between 45% – 75% of the appraised value of your home. We recommend you visit our reverse loan calculator to get an estimate of this value for free.
Will I be taxed on the money I get from a reverse mortgage?
All of your proceeds from a reverse mortgage are tax free, so no, you have no tax liability when it comes to the funds you are receiving from your reverse mortgage. Don’t forget that the home taxes and insurance fees will continue to be paid by the borrower (this would be the case even if you had no mortgage on the home).
Are there any limitations as to what money from a reverse mortgage can be used for?
There are no limitations on how you use the funds, if you happen to have a first mortgage or any tax liabilities those will have to be paid off before you receive the remainder funds from the reverse mortgage.
Can I get foreclosed upon with a reverse mortgage?
You are responsible for maintaining the home’s insurance and taxes payment on time, if you are in serious default of those two obligatory payments then you run the risk of foreclosure. As long as you maintain the home is good shape, pay the taxes/insurance on time, you will not be foreclosed on. Seniors who are facing foreclosure and do not have a reverse mortgage on the property now should consider using the reverse loan to stop the foreclosure and to save the home if enough equity is currently available in the home. As there are no income or credit score requirements you are able to qualify to release the equity to pay off any mortgages or to catch up with any past due payments to save the home.
Is there any likelihood that my pension will be affected if I seek reverse mortgage?
Reverse mortgages usually don’t impact pension schemes, however you should speak to the company/organization managing your pension to make sure as well.
When must a reverse mortgage loan be repaid?
Your reverse mortgage loan becomes due when one or more of the following conditions occur:(a) The last surviving borrower passes away or sells the home(b) All borrowers permanently move out of the home(c) The last surviving borrower fails to live in the home for 12 consecutive months due to physical or mental illness(d) You fail to pay property taxes or insurance(e) You let the property deteriorate, beyond what is considered reasonable wear and tear, and do not correct the problemsWhen the loan becomes due, the reverse mortgage principal advanced, interest charges, and service fees (including closing costs) are paid in full from the sale of the house or other assets of the estate. Whatever is left over from the sale of the home goes to the owner or estate.
What are my responsibilities in a reverse mortgage?
You will be responsible to pay for the home’s maintenance, property taxes and property insurance – along with making sure you live in the home as your primary residence which is at least 6 months out of the year. As you are aware now there are no monthly mortgage payments to make so the above requirements are all that is needed to be current on the HECM loan.Can I get a reverse mortgage on my vacation home, second property, time share?
Unfortunately no, the reverse mortgage can only be taken on your primary residence (you must live in it for 6 months out of the year). You can get a reverse mortgage on your primary residence and maintain your vacation home as long as you live in the primary residence for 6 months.
Unfortunately no, the reverse mortgage can only be taken on your primary residence (you must live in it for 6 months out of the year). You can get a reverse mortgage on your primary residence and maintain your vacation home as long as you live in the primary residence for 6 months.
Will I still be able to pass my house to my heirs in reverse mortgage?
Yes, you still will be able to leave your home to your heirs – as you retire in the home the property will increase in value with the real estate market which will offset some of the borrowing costs. Your heirs will then receive all this equity, they would have 12 months to sell the home to come up with the proceeds to pay off the amount you borrowed with the reverse mortgage. If they wish to keep the home then they need to find a way to refinance or pay off the loan to keep the home. With a reverse mortgage at current interest rates it is very doable to borrow the maximum amount while still leaving ample equity for your heirs.
When should I start seriously considering reverse mortgage?
Give yourself ample time to research and discuss your options in your retirement with your family, the reverse mortgage is becoming more and more popular as it allows for many seniors to use their homes equity to retire comfortably. While the program is not for everyone, those who can qualify and either want to retire in their current homes or pay off their mortgages to no longer have a payment are finding it to be the right choice. If you are not prepared financially for your retirement but own a home this might be the right product for you, but please do comparison shop your other options as some cost less compared to the HECM program. With reverse interest rates at all time lows now is a good time to consider one. Please don’t wait for an emergency to start considering a reverse mortgage as it can take up to 2 months to secure one.
What if the home is held in a trust can I still qualify for the reverse loan?
If your property is currently in a trust, you will need to provide a copy of your trust documents. If the terms of the trust are in accordance with HUD guidelines, the loan may close in the name of the trust. If the trust is not in accordance with HUD guidelines, you may need to amend the trust or remove the home from the trust.
Will the loan amount increase over time?
Because you do not pay monthly mortgage payments, the amount owed on the loan does increase over time due to the accrued interest. Instead, the loan is repaid in one lump sum when you move out of the home or after you pass away. If there is not enough in the sale of the home the FHA insurance will cover this remainder and not your heirs/estate.
What happens if one of the co-borrowers of a reverse mortgage passes away?
Reverse mortgages will remain in term as long as at least one of the borrowers lives in the mortgaged home. If one of the borrowers passes away, as long as the other still lives in the home, no changes will be made. They will still be able to receive loan payments and the loan will not become due until both borrower pass away or move out of the home.
Can a lender make me invest my money from my reverse mortgage elsewhere?
You are not required to use the proceeds to buy or invest in any other product, and there are warnings from the FTC that consumers should be aware of scams involving sales people trying to take your money after you receive the reverse mortgage.
After the borrowers pass away what happens if there is money left over?
Any funds which remain will go to your heirs/estate, they will be able to either sell the home to keep all profits after paying off the reverse mortgage.
Can I get a reverse mortgage if I have a second mortgage?
Having an existing mortgage, even a second mortgage, does not mean you are ineligible for a reverse mortgage; the next question to ask is do I have enough equity available to qualify. With a reverse mortgage the lender will allow you to pay off any mortgages but there has to be enough equity left in the home – as with a reverse mortgage you wont be borrowing the entire home’s value (there is always 30-40% of the home which remains untouched). This untouched portion of your equity belong to you and it grows over time as the home’s value continues to grow.
Is there a maximum limit as to how much I can borrow with a reverse?
There are maximums and limits to the HECM program – 1st the property value cap is set to $625,000 so all HECM loans with properties above this value will be capped at that maximum. The actual reverse proceeds are based on your age, property value, mortgage rates, and if you have any existing mortgage balances. Thus with a HECM reverse mortgage you are not going to be able to borrow the entire amount of the home’s appraised valued but usually somewhere between 50-75%.
Can I get a reverse mortgage if I've filed for bankruptcy before?
Good news, you are still eligible to qualify for a reverse mortgage since there are no credit score requirements and the BK is not a determining factor.
If my home is paid for, how would I benefit from a reverse mortgage?
Having your home paid off means you have all of the equity available to tap into with the reverse mortgage – depending on your retirement income/goals you can choose the HECM program to assist you. For example, if your home is paid off but you need more money on a monthly basis then you should look into that option, meanwhile if you are simply looking for a safety nest then consider a credit line. The credit line is the most flexible as it allows you access to a portion of the equity, and the best part is that the interest only beings when you borrow (and is only charged on the amonut borrowed) any amount which remains grows over time like an investment account at a pre-dertimined rate by the lender. Having a reverse mortgage can protect your equity you have worked hard to earn, if values drop significantly you will have secure a portion of it – which you will always have access to with the reverse mortgage (if you did not have a reverse mortgage that equity would be eliminated from the prices dropping).
Do reverse mortgages have any sort of prepayment penalty if I decide to pay off the loan early or make monthly payments?
There are no prepayment penalties for a reverse mortgage, so you are welcome to make payments or repay the entire loan at any time if that is what you wish to do . Keep in mind that you are not required to make payments for a reverse mortgage until the loan is due, but if you wish to pay any portion of it early you can without fees/penalties being incurred. Something which can also help to offset the borrowing costs is the fact that the home’s value should increase every year by at least 2-5% in a good real estate market, thus at some points making the interest charge on the loan obsolete.
If I owe taxes on my property can I still go through with a reverse mortgage?
This answer does depend on your states property/tax laws, but usually and assuming you have enough equity to pay off this tax debt with the homes equity (and any other lients on property) then yes you will qualify.
Can I use reverse mortgage to pay off my medical debt?
There are no restrictions on how you spend the finds of the reverse mortgage, so yes you are able to pay off your medical debt if you have enough equity to do so.
Will the lender own the home or will I if I get a reverse mortgage?
No, the lender never takes ownership of the home in the reverse mortgage process. You continue to hold title after getting a reverse mortgage and until you or your heirs choose to sell the home. The lender is merely loaning you funds against the equity of the house, and these funds are repaid when the last borrower voluntarily leaves the home or passes away. Sometimes the borrower or their heirs choose to sell the home in order to repay the loan, but that is not their only option and it is not required by the lender.The idea that the lender owns the home is just one common misconception about reverse mortgages. To find out more facts about this program, feel free to contact one of our professionals, and they will be able to give you accurate information so you can make a sound decision for you and your family.
Can a family member stay in the house if I take a reverse mortgage?
Yes, the home is you’s to do as you wish with it, anyone can live with you and you do not need the lenders permission.
Do I need to be represented by a lawyer to get a reverse mortgage?
No, a lawyer is not necessary in order to secure a reverse mortgage, you may speak to your lawyer about any tax/trusts/legality of the any topics revolving around your specific needs. While they are not needed it can be another point of advice/influence and it should be helpful to have one in case you have legal questions.
Can I qualify even if i am currently behind on my mortgage, taxes, and insurance?
Yes, you will still be able to qualify for the HECM loan – the only thing is that any back taxes, mortgage payments, or insurance payments will have to be paid from the proceeds you borrow (this is a must). Also we would like to inform you that the property taxes and insurance are payments for which you are responsible through the life of the loan, and if these are late it can cause the loan into technical default, so please budget in those expenses accordingly.
Can I take out a reverse to buy a home - I believe this is called a HECM for purchase?
Yes, taking out a HECM reverse mortgage to purchase a home is an excellent decision compared to paying for the property with only cash or with a regular mortgage (since with the reverse mortgage you wont have any mortgage payments). There will be a down payment made equal to roughly 40-50% then the remaining funds will be the reverse loan from a lender. This may be a better option than paying for the home with all cash as it allows you to buy the home while also keeping more of your money for your retirement.
What happens when the last borrower passes away to the property?
If the borrowers have passed away, the heirs/estate are given up to 12 months to make arrangements for the sale or purchase of the home. If the goal is to sell the home the heirs/estate would have ample time to find a buyer, receive the difference between market value versus what is owed on the mortgage. If the heirs/estate wish to keep the home they would have the same time to come up with the money, refinance, or pay off the loan with cash.”Should you pass away with a reverse mortgage and there is no other home owner listed on the title of your property, then your loan will become due. There won’t be any pressure for your family to act immediately though, they have up to six months to decide how they will repay the loan. Their choices are to sell the property, take out a traditional mortgage, refinance, or find the money by other means to cover your loan. Once the original loan amount plus interest and fees is paid back, the remaining equity will go to your family to use however they wish. If you’re survived by one of the other title holders to the property, then no changes will be made, they may continue to live in the home and reap the benefits of the reverse mortgage.
Can I make payments to my reverse mortgage loan and pay it off early?
Yes you can, there are no prepayment penalties for paying off the loan early or for making interest payments. The purpose of the loan is to allow you to improve your retirement, so I would recommend you consider keeping some of the money to create a savings account and or to invest (invest in yourself as well as you will only retire once).
What if my home needs improvements - how can I pay for them?
Your home must meet government established property standards, but you can generally use the reverse mortgage proceeds to pay for any home repairs that may be required.
Do I have to take out the maximum amount that can be loaned to me or can I take out less?
No, you have 3 payment options, two of them being the credit line or monthly income which would allow you to borrow at your own pace (unlike the lump sum which would be borrowing the max upfront). The credit line gives you the most flexibility as you only pay interest on the amount you borrow and the unborrowed portion actually grows at a predetermined rate like a cd account.
Reverse mortgage sounds too good to be true! What is the catch?
The catch is that this is a loan – so like any bank loan there are interest charges which accrues over the life of the loan – not to mention upfront closings costs. So while this is not free money, the program is widely used because it is the only program designed specifically for seniors in their retirement to release equity without having a monthly payment. There are more pros than cons, and with no income/credit scores required all seniors who have equity in the home can ultimately qualify to enjoy their equity (not possible with a regular refinance).How would your retirement benefit from being able to eliminate your current mortgage payment – and or by giving you access to your home’s equity (currently this equity is available in your home but the only way to tap it is by selling or taking a forward mortgage). Many seniors are wanting to retire in their current homes, while selling the home and downsizing is always a option even if you take a reverse loan – always look at the total fees involved in moving (selling one home to buy another can be more expensive than getting a reverse mortgage loan and staying put).
Reverse mortgages have become very popular over the last few years, just last year alone some 100,000 reverse mortgage loans were taken out by seniors just like you. As this particular is becoming more common, lenders have started making the qualifications a lot stricter. Some have implemented income and credit score requirements. At the moment we are able to get you a reverse mortgage without income or credit score requirements, not to mention we have no a ‘no origination or mortgage fee’ policy.
How Does a Reverse Mortgage Work in 2012?
A reverse mortgage is really quite simple. Basically, you can release the equity in your home as money for your retirement, it can be yours without having to make any mortgage payments or without selling your house. Unlike a forward mortgage where you make payments and are given a sum of money to buy or refinance your loan (thus every month the balance goes down little by little), a HECM reverse mortgage can help you can pay off your mortgage (somewhat like a refinance ) or you can take out the equity from the property in the form of proceeds/income. Again no mortgage payments have to be made, lenders still charge an interest rate which accrues to the back end of the loan but as your home increases in value this offsets your interest costs and in some instances the rate of growth on the home will exceed the cost of borrowing.
Some 600,000 seniors have taken out a reverse mortgage during their retirement over the last 22 years. The main reason people take out a HECM loan is to improve the quality of their retirement, by; paying off existing mortgage debt (or any other debt you want to pay off), increasing cash flow, or by simply giving seniors new access to a lump sum of money to be spent without any restrictions.
Receiving your Tax Free Reverse Mortgage Funds
With a home equity conversion mortgage loan you have flexibility as to how you receive the proceeds. There are 3 different options:
- lump sum – With this option you will receive a lump sum of money. This amount can be up to 70-75% of the home’s appraised value. The interest rates are fixed on the HECM lump sum.
- lifetime monthly income – This option will allow you to receive a lifetime source of equal monthly proceeds/income. The rates are adjustable and depend on your age and the available equity in your property.
- credit line – With this option the bank/lender qualifies you for a certain amount of money. You have access to this money when you wish and will only pay interest on the portion which you have borrowed. The interest rates are adjustable.
NOTE: If at any time you would like to change the way you receive you money this is possible.
Choose From 4 Different Reverse Mortgage Types
All 4 types of HECM loans are all government insured HECM loans.
1). Fixed Rate Standard- This is the best program if you are looking for something more long term, this is because the are current interests are low and the fees have been reduced. This options is usually taken if you would prefer to receive a lump sum as the interest rate is fixed.
2). Fixed Rate Saver- This option is for those who don’t need the maximum lump sum funds upfront and are comfortable with an adjustable rate. This program also has reduced fees from the mortgage insurance premium, however, a smaller percentage of equity is available.
3). Adjustable Rate Standard- With this program you can select between receiving your money via credit line or monthly income for life. The amont you can borrow is the maximum amount (the same as Standard Fixed rate). This program is really for those looking to take advantage of the low adjustable rates over short period of time.
4). Adjustable Rate Saver- With this program option you will not receive the maximum amount of proceeds available, however, you will pay less in mortgage insurance premium as rates are historically low for the Adjustable Rate Saver program.
HECM Mortgage Amount Based On:
- The age of the youngest co-borrower (the older you are the more equity you can receive)
- The current interest rate in the market
- Appraised home value or the FHA HECM mortgage limit
- Your personal financial position. HUD has recently approved financial underwriting, there for your payment history, income and credit score and other financial history may have an impact of the amount available.
- The program you choose. The Saver programs have less fees so the lenders extend less of your credit to you.
What are the Loan Requirements for a HECM loan?
No income or credit score qualifications are required*- No repayment as long as the property is the principal residence
- Closing costs may be financed in the mortgage
*NOTE: Income, credit scores, mortgage/taxes/insurance payment history can all affect the reverse mortgage loan and whether or not you will be able to receive one. HUD is trying approved financial underwriting and lenders can now ask for such information. In 2012 we are still able to lend without reviewing the above making the process easy, most lenders cannot state this.
How Can Reverse Mortgage Proceeds be Spent?
The proceeds from a reverse mortgage can be used for almost anything – never restricted:
- to pay for medical costs or save for future medical expenses.
- to pay off any existing mortgages/liens on the home
- to pay credit card bills or other bills
- for home repairs or improvements
- for property taxes and home insurance
- to increase monthly cash flow
- for travel or leisure purposed
- for gifts
Reverse Mortgages and How They Work - with the current reverse rates at all time lows seniors should consider taking out a reverse mortgage now. It has been predicted that the requirements for a HECM loan are only going to get tougher in the future. Improve the quality of your retirement today, with no more mortgage payements and paying off debts. NOTE: Seniors should budget for home insurance and property taxes.
HECM Reverse Mortgage Lenders
Retirement portfolios have seen dramatic losses recently, property values have dropped and stock markets have not performed to well either. This is really the perfect financial storm and those on fixed incomes trying to retire are now facing extremely volatile times. A reverse mortgage has helped seniors just like you regain their financial freedom by securing their retirement income. Last year over 100,000 seniors last year took out a HECM loan.
It is more important than ever to compare multiple offers and to make sure you are getting the most amount of equity possible from your home through a reverse mortgage loan. There are more than 2500+ reverse mortgage providers in the U.S., making it nearly impossible for you to compare all these lenders. We work with top reverse mortgage lenders who are committed to providing you with the best interest rates, the most amount of equity/money, all at the lowest costs.
Quick Guide to a Reverse Mortgage
- Flexible Income Plan- You can select how you want to receive your income, either on a monthly basis, lump sum, credit line, or a combination of the following.
- Ownership of the home- You will keep ownership the home and title. Your heirs will have the chance to own the home and if there is equity they can sell and keep the profits once you pass.
- No repayments- You wont have any repayments whilst you live in the home, if the home’s value increases you can get more equity or sell if you so desire.
Reverse Mortgage Lenders Direct
Our goal is to be the smartest solution for homeowners over the age 62 who are considering a reverse mortgage. Our website is built to help you learn everything there is to know about HECM loan program. We are here to compare multiple reverse mortgage lenders and find the one which suits you best. By using our free service you will receive up to 4 competitive quotes from top reverse mortgage lenders.
If there is something that you are still not 100 percent sure about, please do not hesitate to give us a call at 877 700 0534, if you have questions dont hesitate to use our live chat feature.
REVERSE MORTGAGE LENDERS DIRECT | WHAT IS A REVERSE MORTGAGE By Paul Galante – Add me to your circles
Authority sites on the subject
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm
GD Star Rating
loading...
REVERSE MORTGAGE | REVERSE MORTGAGE LENDERS | WHAT IS A REVERSE MORTGAGE?, loading...