A reverse mortgage is a loan for senior homeowners that uses the home’s equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. Any remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.

Top Frequently Asked Questions (FAQs)

How is a Reverse Mortgage different from a Home Equity Loan?

Both a Reverse Mortgage and a Home Equity Loan use the equity you have in your home to generate cash. With a Reverse Mortgage, you don’t need to make monthly mortgage payments for as long as you stay in the home. However, with a Home Equity Loan you need to make monthly payments on the principal and interest.

How much can I borrow?

The amount depends on several factors: a. Your age b. The type of Reverse Mortgage you select c. Current interest rates d. The location of your home e. The appraised value of your home f. Federal Housing Administration (FHA) lending limits in your area.

How can I receive the cash from a Reverse Mortgage?

You can receive it in a range of options: a. Lump Sum b. Monthly payments c. Line of credit (take funds when you need them) d. A combination of the above

Will my current income or credit report affect my eligibility?

No. You don’t make monthly repayments with a Reverse Mortgage, so there are no income or credit report qualifications.

What if I still owe money on a first or second mortgage?

You may still be eligible for a Reverse Mortgage depending on the amount of your remaining mortgage versus the value of your home.

How will a Reverse Mortgage affect my government benefits?

The funds from a Reverse Mortgage usually do not affect regular Social Security or Medicare benefits. However, need-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be impacted. Contact a tax professional about your particular situation.

Are interest rates fixed or variable?

Most Reverse Mortgages have variable rates that are tied to a financial index and will vary according to market conditions and products. The Reverse Mortgage Group offers both – variable and fixed rates.

Can a Reverse Mortgage be refinanced?

Yes, refinancing is a possibility. This option can be advantageous if the home increases in value, making more equity available.

Other Frequently Asked Questions (FAQs)

Besides the interest, are there other fees?

Most Reverse Mortgages have an origination fee, closing costs, a mortgage insurance premium, and a monthly servicing fee. These fees can be paid by the Reverse Mortgage itself. The cost are added to the principal and paid along with interest when the loan becomes due.

What has to be repaid when the loan comes due?

The loan balance needs to be repaid, along with interest and fees. This is usually done through the sale of the house or other assets of the estate. Repaying it through a conventional mortgage is also an option.

How will a Reverse Mortgage affect the estate I leave to my heirs?

When the loan becomes due, you or your estate must repay the lender for the cash received from the Reverse Mortgage, plus interest and service fees. Any sale proceeds in excess of the loan balance belong to you or your heirs.

When will the principal and interest charges become due?

The Reverse Mortgage loan must be paid in full when one of the following occurs: a. All borrowers permanently move out of the home b. The last surviving borrower passes away, sells the home, or fails to live in the home for 12 consecutive months c. You fail to pay property taxes or insurance d. You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problems .

What if one of the co-borrowers passes away?

The surviving borrower can continue to own and live in the home – and enjoy all the benefits of the Reverse Mortgage.

What if one of the co-borrowers is not 62 or older?

If one spouse is not 62, there are still strategies that can be employed that will enable you to obtain a Reverse Mortgage. These strategies can be very safe and practical.

Do I have to fix up my house to qualify for a Reverse Mortgage?

Your home doesn’t have to be in perfect shape, however if there are minor repairs that are required by the lender, they can be done after the closing in most cases.

Should I shop around for a better interest rate for a Reverse Mortgage?

The federal government determines the interest rate for HUD Reverse Mortgages. This means that no matter where you go for your Reverse Mortgage, the rate will be exactly the same. You want to work with a lender that is helpful, knowledgeable, and professional and that doesn’t try to pressure you.