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Reverse Mortgage

A Reverse Mortgage is a loan that allows you to access a portion of your home’s equity and convert it into tax-free retirement income.

 

 

Questions and Answers About Reverse Mortgages:

How do I qualify for a Reverse Mortgage?

To qualify, you must be 62 or older and be the titleholder to you home.  No income is necessary to qualify but you do need a fair amount of equity in your home.  Your home must be a single-family residence in a 1-to4 unit dwelling, or a HUD approved condominium; some manufactured homes are eligible, but cooperatives and many mobile homes are not.

If no monthly payments are required, how is my Reverse Mortgage paid back?

To pay off the loan balance, you or your heirs can sell the home, use other sources of funding or use the funds from a new mortgage.

Does my credit score or income influence my eligibility?

No.  There are usually no credit score or income requirements in order to be approved for the loan.  You can even have bad credit, as long as there are no current government liens against your home.

What if I have an existing mortgage?

If you currently have a mortgage, that is ok.  However, a portion of the funds you receive from your Reverse Mortgage (or funds from another source) must be used to pay off any existing mortgage you have on the property at closing.

Will I still own my home or will I loose it?

You will still own your home and you can stay in it for as long as you wish, provided you pay your taxes, insurance and maintain the home according to FHA requirements.

Are there property and insurance requirements?

Because you still own your home with a Reverse Mortgage you’re responsible for the general maintenance and upkeep as well as for paying all ongoing property taxes and insurance. These expenses can often be paid for with funds from your Reverse Mortgage.

What types of loans are available?

Most of our loans are Home Equity Conversion Mortgages (HECM).  Always ask to see a comparison of various loans so you have a complete understanding of what is available.  We can objectively help you decide which of our federally insured products best fit you needs.

How much of my home’s equity can I access with a Reverse Mortgage?

The loan amounts vary based on which Reverse Mortgage product you choose.  The amount you can receive depends on your age, current interest rates, and the appraised value of your home or FHA lending limits.  Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow.

How can I use the money?

The money you receive from your Reverse Mortgage can be used any way you choose.  There are no limitations or restrictions, once you receive the net proceeds.

What costs are involved with a Reverse Mortgage?

As with any other loan, there are closing and other costs, all of which can often be paid with the money generated by your Reverse Mortgage, resulting in no out-of-pocket costs to you.

Will I have to pay any taxes?

No, because the money you receive is considered loan proceeds rather than income, it is tax-free.

Will this loan affect my Social Security or Medicare benefits?

HECM Reverse Mortgage payments typically do not affect your Social Security or Medicare benefits.  However, regulations vary for the federal Supplemental Security Income program and for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps.  We suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how HECM payments may affect your particular situation.

How will I receive the available funds?

The most common way is to draw from a line of credit to use at your discretion.  You can also choose to receive a single lump sum, regular monthly installments, or any combination of these options.

Will my family or estate ever owe more than the value of my home?

No.  With a federally-insured Reverse Mortgage you’ll never owe more than the appraised value of your home when the loan matures, so long as the home is sold to repay the loan.

What if I want to leave our home to the kids?

It’s your home.  You can still leave it to your children, or to anyone you choose.  When the loan becomes due, you or your heirs will have to repay the amount owed.  However, you or your heirs will always have the option of paying off the entire balance and keeping the home (which can be done by refinancing or with a standard mortgage or by using other funds) or by selling the home to pay off the balance.  In any case, the amount of the loan can never exceed the value of the home when the loan is due, provided the home is sold to repay the loan.

Will I incur any penalties if I decide to pay back the loan early?

No.  You can pay back the loan at any time without the worry of being penalized.