What is a Reverse Mortgage?

A Reverse Mortgage enables homeowners 62 or older to convert the equity in their home into cash, while continuing to live in their home. Homeowners can be paid their equity in one of three different ways (or any combination):

1. As a lump sum
2. As monthly income for life or a fixed number of years
3. As a line of credit

Are Reverse Mortgages only for the “needy’?

Reverse Mortgages are NOT solely for those in financial need. They are used by anyone who wishes to convert equity value in their home into liquid assets.

This FHA-HUD government-approved program was originally designed to provide revenue for senior homeowners who needed additional income to remain in their homes.

However, everyone over 62 whose homes have developed substantial equity; those who own their homes free and clear; and seniors who have a relatively small mortgage, can now convert their previously non-liquid equity into cash, a line of credit, or a lifetime income.

No payment is required for as long as you continue to live in your home!
In short, the government’s FHA-Insured HUD Reverse Mortgage program now provides senior homeowners a safe way to access the equity in their homes, enabling them to enjoy their retirement years with greater financial comfort.

What are the benefits of a Reverse Mortgage?

One of the benefits is that the mortgage can never exceed the value of your home.
That means that if today’s housing prices start to decline, your heirs won’t be held responsible for paying back an amount larger than the house is worth.

Additionally, accepting the money in no way alters the ownership of the house.

No repayment is required for as long as you live in your home! You, the homeowner, retain title to your property and can choose to sell your home at any time.

What can I use the money for?

This is your money to use for whatever you want, be it home repairs, a remodel of your home, pay off an existing mortgage, medical bills, in-home nursing care, credit card debt or to supplement your Social Security or pension checks. Buy a new car, an R.V. or just enjoy the ‘gold’ in your golden years.

Do I have to pay taxes on the money I receive?

No, the money you will receive is tax free.

Does a Reverse Mortgage require that I make a monthly payment?

No, there are never any monthly payments; payment of taxes, insurance and general upkeep are the only responsibilities of the homeowner.

Must my home be free and clear?

No, you may pay off a mortgage or equity loan with a Reverse Mortgage. In fact many people get a Reverse Mortgage to pay off their current mortgage to eliminate their monthly payment.

Do I have to have income and good credit to apply?

No, a Reverse Mortgage has no income or credit qualifications.

Do I have to repay the Reverse Mortgage?

As long as you live in your home you will not have to repay a Reverse Mortgage. Once you no longer live in your home or if you sell your home, then you or your estate will repay the cash you received from the Reverse Mortgage, plus interest.

Can the lender take my home away?

No! You cannot outlive the loan agreement. You cannot be forced to sell your home to pay off the mortgage loan.

The FHA guarantees that you will receive all the payments that are owed to you. The Reverse Mortgage is a non-recourse loan, which means the bank can never come after any person or estate for repayment of the loan.

The lender can only receive payment of the loan from the value of the home.

Will I still have an estate that I can leave to my heirs?

Yes. When your home no longer is your primary residence, because you have sold it or are no longer living there, then you or your estate will repay the cash you received from the Reverse Mortgage. You or your estate will also have to pay interest on the monies you have received.

Any remaining equity in your home can be passed on to your heirs. None of your other assets will be affected by a Reverse Mortgage. More on using a RM in estate planning HERE.

Any remaining equity in your home can be passed on to your heirs. None of your other assets will be affected by a Reverse Mortgage.

Why should I get a Reverse Mortgage and not a bank home loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income to qualify for the loan. With a Reverse Mortgage you cannot be foreclosed or forced to leave your home because you missed a mortgage payment, because there are no payments on a Reverse mortgage.

How do I qualify for a Reverse Mortgage

1. You must be 62 or older
2. Your home must be owned free and clear or have a mortgage balance that can be paid from equity
3. It must be your principal residence
4. The property must be a single-family home; a one-to-four unit dwelling with one unit occupied by the applicant; a qualified manufactured home; or a unit in a HUD-approved condominium or Planned Unit Development (PUD)
5. The property must meet minimum standards
   

How many types of Reverse Mortgage are there?

There is only one type of Reverse Mortgage:

1. The FHA-HUD insured HECM (Home Equity Conversion Mortgage)
   

How much money can I receive from my Reverse Mortgage?

The amount available is based on several factors: Your age, home value, current interest rates and the specific plan you choose. Generally speaking, the older you are and the higher the value of your home, the more money will be available.

Call us toll-free 877-253-3993 or 719-930-0797 for a free estimate on the amount you can receive on your home.

What if my home is in a living trust or in a homestead?

The trusts and homesteads are usually accepted; however the documents are subject to review.

Can I pay off my current mortgage and have no mortgage payment?

Yes, if your current mortgage does not exceed the Reverse Mortgage loan limits.

Will I have to pay fees to obtain my FHA insured Reverse Mortgage?

Yes. You will pay an origination fee, actual closing costs including charges by the Title and Escrow companies and a mortgage insurance premium. These charges (fees) are similar to the costs you incurred when you purchased and financed your home. These fees will be financed with your loan—you will have no Out-of-Pocket costs.

How much interest will I have to pay for a FHA insured loan?

The interest charged is dependant on the plan you choose. Variable and Fixed rates are available. You pay interest only on the amount of money you have received.

How do I draw down on my credit line?

You just notify your lender how much money you want. You can change your monthly payment schedule at any time. You can also draw lump sums of cash at any time. Remember it’s your money.

What do you mean by a growing credit line?

If your Reverse Mortgage is FHA insured and you have elected to take a portion of your loan as a credit line, that credit line will grow annually by the rate of interest charged, on the monies you have received.

Example: Your credit line is $100,000 and the rate of interest being charged is 6% at the end of one year, your credit line would have grown to $106,000. Remember, you pay interest only on the amount of money you have received

What about borrowing?

Many of us have been well served by these borrowing cautions: “Don’t borrow in general.” “Don’t borrow against your home in particular.”

Borrowing usually means using money you haven’t earned yet. You borrow today in the hope that you will be able to earn enough in the future to repay it. So, you are borrowing against your uncertain future earnings—which is like “counting your chickens before they hatch.” That’s generally not a good idea unless you have a steady job and good prospects.

But this caution doesn’t really apply to Reverse Mortgages because you are not borrowing against future income. In fact, you are borrowing against home equity that you have already earned. So you aren’t counting your chickens before they hatch. You are hatching the nest egg you’ve already earned.

Borrowing against your home usually means paying back a loan every month. But if you lose your job or your income drops, you could be forced to miss some payments and lose your home to foreclosure. That’s why it’s generally not a good idea to borrow against your home unless it’s for a very basic purpose. You want to avoid jeopardizing your home ownership.

This doesn’t apply to Reverse Mortgages though, because no monthly repayment is required. You can’t lose your home by missing a payment because there are no payments to make.

Shouldn’t I leave my home free and clear for my children?

That’s up to you. Most children want their parents to have a more abundant life. If you have questions about this why don’t you talk to your children? I think you will find most will want you to get a Reverse Mortgage, and for you to be comfortable and enjoy a more abundant life.

Who benefits if my home appreciates during the life of the mortgage?

You or your heirs get the appreciation. You are required to pay back to the lender only the money you have received plus interest and closing costs.

Do I have to talk to a counselor?

Yes. All Reverse Mortgage applicants are required to consult with a HUD-approved counselor before applying for a reverse mortgage. Contact us for a list of approved counselors.

How long will it take me to get a Reverse Mortgage and receive my first payment?

A lot depends on you. You first must receive counseling and decide whether a Reverse Mortgage is for you. When you have decided you want a Reverse Mortgage and have filled out an application, it takes approximately 4 to 6 weeks before you receive your first payment.

Is there a lot of paper work involved in getting a reverse mortgage?

Yes and no. No, not for you the borrower. Yes, for the lender because this is a government insured loan and every one wants to make sure that all of your rights and your financial future is protected.

All you have to provide is the following:

1. Counseling certificate (you receive this after your counseling)
2. Official evidence of date of birth i.e. Copy of picture I.D. such as drivers license.
3. Copy of birth certificate if available.
4. Copy of Social Security or Medicare card.
5. Copy of home owner insurance or recent statement.
6. Copy of living trust if any.
7. Original Power of Attorney if any.
8. Name and Account # and approximant balance of any lien holders on the property (mortgages.)

How can I find out about my specific situation?

You can evaluate the different Reverse Mortgages with no cost, no-obligation comparison of the available plans by calling Dick or Patty at “Senior Serving Seniors Inc” Toll free 877-253-3993 or 719- 930-0797

Which lender should I use?

We can help by writing your loan with an FHA-approved, Reverse Mortgage lender.

Like you, we are fellow seniors and can readily relate to your needs and unique circumstances. We are experienced specialists in all phases of Reverse Mortgages and can assure you of expert, friendly, confidential and courteous service.

If you would like information to give to a friend or relative, please call us here at Seniors Serving Seniors.

If you would like a free estimate of how much money you can receive or if you would like to talk with Dick via telephone and have a personal consultation, please contact us.

These questions and answers were compiled by Seniors Serving Seniors Inc. to assist senior homeowners in making an informed decision.

For more information, call Seniors Serving Seniors Inc toll free at the number listed below.