Reverse Mortgage

 Qualification | Contact Information | Facts & Details | Benefits

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What is a reverse mortgage?

  • A reverse mortgage is a unique loan that enables senior homeowners to convert part of the equity in their homes into cash without having to sell the home, give up title, or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 or older who own their own home.
  • A Reverse Mortgage is a non-recourse loan which means you cannot be liable for more than the fair market value of your home at the time you close the account.

How is a Reverse Mortgage different from a conventional loan?

  • Does NOT require repayment until
  • Borrower(s) move
  • Borrower(s) sell
  • Borrower(s) pass away
  • No income and minimal credit qualifications.
  • No monthly mortgage payments.
  • No restrictions on how the money is used.

How safe is a FHA Reverse Mortgage?

  • FHA administers the HECM program and guarantees that borrowers receive their requested loan advances if the lender defaults.
  • You or your heirs will NEVER own more than your house is worth.

Qualification

  • All individuals on title MUST be 62 years or older.
  • Home must be 1-4 family residence.
  • Most condominiums and PUDs are eligible.
  • Manufactured homes are acceptable on an approved FHA foundation.
  • Any existing liens or mortgages must be paid off with the proceeds of the loan.
  • Mandatory free counseling session by HUD approved housing counselor.

Borrower's Responsibilty

  • Keep property taxes current.
  • Maintain homeowners insurance.
  • Maintain property in good condition.
  • Utilize home as primary residence.

Repaying the Loan

  • No repayment necessary until you move, sell or pass away.
  • No penalty for early payment.
  • Non-recourse loan.

For more information

Facts and Details of Reverse Mortgage

  1. Definition - A reverse mortgage is a unique financial tool that allows homeowners age 62 and older, to access the equity in their home and use the cash for whatever they choose. The borrower(s) retain full ownership of their home. There are no income or credit qualifications and repayment is deferred until the borrower(s) permanently leave the home.
  2. Qualifications - Borrowers must be at least 62 years of age. The borrower(s) must live in their home as a primary residence or use a second home that is not rented. If there is a current mortgage on the property it will need to be paid in full with the proceeds of the reverse mortgage.
  3. Loan Amount - The loan amount is based on the home value, the age of the youngest borrower, the current interest rate and the lending limits determined by HUD. The county and type of reverse mortgage elected determine the lending limit.
  4. Counseling - all borrowers are REQUIRED to receive counseling from an approved HUD counseling agency. Click here to find a list of counselors in your area. The counseling can be completed by phone or in person. The counseling is designed to help a borrower gather all the facts and provide a place to verify the accuracy of their information.
  5. Payment Plans - Reverse Mortgage borrowers can choose from several payment plan options
    • Tenure - Borrower receives a set monthly check for as long as they live in the home.
    • Line of Credit - Borrower can draw from the approved line of credit as needed up to the maximum limit. Unused portions of the credit line grow at a rate of 0.5% over the current rate being charged.
    • Lump Sum Cash - Borrowers can take all cash available at one time.
    • Modified Tenure - Any combination of the above options.
  6. Processing Time - On average it takes approximately 3 to 4 weeks to process the Reverse Mortgage loan.
  7. Closing Costs - Most closing costs are financed into the loan. You should get a good faith estimate from your Reverse Mortgage Consultant. There are several Reverse Mortgage programs available each with different closing costs.
  8. Interest Rate - The interest rate charged varies depending on the Reverse Mortgage program selected by the borrower. There is a variety of programs to choose from including variable and fixed rates and you should be show at least three options.
  9. Repayment - The Reverse Mortgage becomes due and payable at the time the borrower permanently leaves the home or title transfers. The reverse mortgage is usually repaid by the heirs when the home is sold but can also be paid with proceeds from a conventional loan or other means of cash such as a life insurance policy.
  10. Social Security - Reverse Mortgages are considered borrowed money and typically do not affect social security or social benefits. If the borrower still owes on the home, the Reverse Mortgage will pay that balance off, however the borrower remains the owner in title.

Benefits of a Reverse Mortgage

  1. You never have to make a monthly payment.
  2. You can eliminate a current mortgage payment.
  3. You can have tax-free income.
  4. You will continue to own your home.
  5. It won't affect Social Security or Medicare benefits.
  6. Most loans are government insured.
  7. There are no restrictions on how you spend this money.
  8. You can receive your money several ways.
  9. You can repay the loan at any time without penalties.
  10. You will never have to repay more than your home value.
  11. Counseling form a HUD approved housing counselor will help ensure you understand the program.
  12. You heirs will keep all remaining assets.



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