Thank you for your question. We've gone ahead and posted this in our "Ask the Expert Series" found here

Hi Gerald-

Let's start with your last part of your question first and work our way back. The answer to whether or not you can be prequalified is "yes and no". The lender can do everything they need to on your part to see of you meet the requirements for the program, but there are always a few things for the HUD requirements that cannot be 100% determined until after the property has been chosen and all parties have been run through HUD's GSA/LDP lists to determine if they are eligible to take part in a loan program with government-insured financing (not to mention the property has to meet all specified parameters and many condominium projects do not). We do multiple purchase transactions every month and we tell borrowers to be sure to include a provision in the purchase contract for final financing approval even if a borrower has been "pre-qualified".

The benefit amount of the reverse mortgage will be determined on the lower of the Sales Price, Appraised Value or HUD Lending Limit. The HUD Lending Limit is currently $625,500 so assuming the property you purchase is valued/purchased less than that, the benefit amount (loan amount) would be determined from the lesser of the sales price or appraised value.

Finally, the amount received under the reverse mortgage is determined by a number of things which are all put into a calculation and if you are considering different homes and different purchase prices, the best thing to do is give the information to your reverse mortgage specialist and let him/her give you a proposal tailored to that purchase price. He/she will run the specifics based on the anticipated closing costs for that area and the sales prices you desire and give you the information you need to make a decision as to what purchase prices you may want to consider. Give us a call, you may also find our purchase calculator helpful in estimating your required down payment.

The issue really isn't how long you have to wait. On a bona fide purchase there is no seasoning requirement before you can do a reverse mortgage. If you bought the home for cash and moved in, you are eligible for a reverse mortgage immediately.

The issue that some borrowers run in to is that they are trying to use the current value and not the value or sales price, whichever is less. The problem most borrowers have is that if they buy a home at auction for less than the actual value, the lender is going to use the current appraised value, or the acquisition cost (purchase price) of the home for 12 months. Lenders will allow you to use the value of any verifiable improvements you make to the home, but they will not give you credit for more than the purchase price for 12 months unless you can prove that you put the money into the property and then only the amount you actually put in.

For example, if you buy a home at auction for $100,000 and now you believe the home will appraise for $150,000 because you got such a good deal, the lender will not allow you to use the $150,000 value for the first 12 months. They would determine the amount of your benefits on the $100,000 purchase price.

On the other hand, if you bought the property for $100,000 and then you put $50,000 into the property to improve the property and have the receipts to show the expenditures, the lender will allow you to include these costs in the value consideration. Keep in mind though, that if you put $50,000 into a home after you pay $100,000 and the new appraised value is $225,000, the lender will still base your eligible benefits on the purchase price plus the cash into the property or $150,000 if you take the loan out within the first 12 months, not the higher value of $225,000. To estimate your down payment on a reverse mortgage for purchase scenario use our HECM Purchase Calculator or call us at (800) 565-1722 for a complete analysis.

The Reverse Mortgage is a non-recourse loan. That means that the lender can only look to the property to repay the obligation, regardless of other assets. There is no telling what the value will do between now and the time your father ultimately leaves the property but you are correct in that any money in your father's checking account would not be subject to forfeiture in order to repay the reverse mortgage balance.

A reverse mortgage can be refinanced but only if the loan meets certain benefit tests for the borrower. HUD will not allow originators to refinance reverse mortgages for little to no benefits for the borrowers. If you are unsure if you would derive adequate benefits to refinance your reverse mortgage, you can contact a reverse mortgage specialist and with just a small amount of information, they can let you know. You would need to have your current statement as there is information on it that they will need; a copy of your closing statement from your existing reverse mortgage is extremely helpful as he/she will need to know how much Up Front Mortgage Insurance Premium (UFMIP) you paid on the first closing, and an approximate value of your home.

At that point, they can run the numbers and determine if the refinance is even in your best interest. Remember, some costs like the amount of UFMIP that you already paid would not have to be paid again, but you would have to pay title fees and other closing costs and depending on the area in which you live and the value of your property, these can still add up to more than $5,000 in some parts of the country on higher valued properties. A quick review does not cost you anything and at that point you would know if it makes sense for you. Give us a call at (800) 565-1722 or request a quote by clicking on the header link of our site, we’re happy to run you an analysis.

Hi Judy, HUD has very specific guidelines with respect to water sources, water pressure and water testing when the systems are not public systems. A tank with water delivery is not listed in HUD's acceptable water sources list. (Link to HUD's water system requirements)

Having said that, since we are not licensed in AZ, I have not had to deal with this particular set of circumstances and you may not have been given the final word on the matter, I really can't say. HUD does have a procedure available for waivers and they do grant them, we have gotten them on some water systems specifically mentioned as unacceptable conditions in the HUD manual. It is not quick or easy and requires several inspections and reports and then a waiver directly from HUD, but I would suggest that you ask a reverse mortgage specialist licensed in your area if they have ever tried for a waiver request on a property such as yours. If they have and HUD just won't grant them, then it did not hurt to ask and if they have not tried, you may find that HUD will grant a specific waiver for your home.

I wish you good luck and let us know how you make out.

In the past, HUD and lenders had almost no credit qualifications for a reverse mortgage. As long as the bankruptcy was completed and there was a good explanation for the foreclosure, the loan could still be done without too much problem if all other factors were as required by the program. However, HUD is going to announce new financial and credit assessment guidelines that will require borrowers to "qualify" to some extent for the reverse mortgage very soon. HUD has not announced their new requirements yet, but the National Reverse Mortgage Lenders Association (NRMLA) and at least one major lender have announced their recommendations or guidelines (in the case of NRMLA recommendations, in the case of the lender, they are their new lending guidelines). Other lenders have chosen to wait for HUD's announcement presumably so that they can issue guidelines one time - knowing that they will cover all requirements and not be too restrictive at the same time. Read more about credit qualifications here...

A number of factors go into the amount you receive on a reverse mortgage loan. The short answer though is that if you are not within 180 days of your next birthday, with today's rates and assuming your value is not greater than the current limit of $625,500 (which is currently set to go down to $417,000 on January 1, 2012 if Congress does not act to extend the current temporary increased limit), then you could expect to be eligible for a gross benefit of approximately 68% of the value of your home on the standard programs from which any liens and the reverse mortgage fees would be deducted. Some closing fees vary by area and so the only way to really know what you would be eligible for would be to have a proposal prepared with all your specific information.

The trust would have to be approved by the lender as meeting HUD guidelines and one of the things they look for is that the trust is revocable, not irrevocable (among other things). I am not an attorney and obviously could not give advice on a trust I had not seen even if I was so I would suggest that you find an attorney who renders legal opinions on trusts for lenders as to whether or not they meet HUD guidelines and have the trust reviewed. If it doesn't meet the standards and cannot be changed, the property would be ineligible for HUD lending programs and you really need to know that.

Hi Vince, We can only offer rates that are available in the secondary market. Unfortunately, since the number of reverse mortgages done is such a small number in comparison to the number of forward mortgages, the mortgage-backed securities originated and sold for this product is extremely limited. That does not allow lenders to get too creative or aggressive with the products as they cannot originate enough of the loans or sell enough of the securities. To make a long story short, I have a higher rate than the 4.5% available, but nothing lower at this time.

Hi Joel, There is no "cap" on the amount of interest that can accrue. In many cases, especially if the value of the home declines aw they have done in recent years, the balance of the reverse mortgage did exceed the value of the home. Although I saw several bad articles chided reverse mortgage for this fact, it actually worked to the borrowers' advantage and the authors did not take the positives of the product into consideration.

The example the authors used was a borrower who, with her husband, borrowed approximately $225,000 on their home with a reverse mortgage. After several years of living in the home without making any loan payments, the balance had grown. The husband passed and the wife found herself needing to leave the family home to move to a nursing facility and the property was now worth only $167,000, well below what was owed on the reverse mortgage.

Authors howled about the excessive fees (the highest fees were the HUD mortgage insurance fees of over $8,000) and they talked about how this borrower now had to leave her home with nothing because the reverse mortgage now had a balance of over $300,000 and there was nothing left for her. what escaped everyone was that the borrowers received $225,000 just a few years earlier, that they lived in their home for several years without making a payment and regardless of any type of mortgage, if you take a loan out for $225,000 and property values decline to $167,000, there will be no equity left when the home is sold.

The best thing that could have happened to this borrower is that they did take out the funds in a reverse mortgage since reverse mortgages are no-recourse loans. In other words, the borrower and her heirs never have to repay the shortfall between the current value of $167,000 and the $300,000+ owed on the loan. The HUD mortgage insurance premium that the borrowers paid made certain that they and their heirs would never have to pay any shortfall.

So the bottom line is that while we all hope that we get back to real estate markets where we see appreciation and that loan balances do not grow beyond the value of the homes, it is entirely possible and probable if the borrowers stay in the homes long enough and value do not increase. However, that is a common occurrence in today's market with loans of all kinds and falling values, but on other loans borrowers are also making monthly mortgage payments and are not guaranteed to be able to stay in their homes as long as they live there and meet the conditions in the mortgage agreements.

Hi Jim, Great question. If you want to have a reverse mortgage with your spouse now included on it, you would have to do a new loan and the benefits would be based on the current value and the youngest spouse's age (your wife). If you took a line of credit before and have not used all your funds, this may not be a tough thing to do (depending on property values and how much money you did use). If however you took the maximum amount of cash available and your property has gone down in value during this time as most of the country has continued to drop in value, then it may require you to come in with cash to close a reverse mortgage at this time in both your names. She can always be your heir and receive the home by will if you do predecease her even if you do not get a new reverse mortgage, but that may not be of any comfort if the values have gone down and she has no way to retire the existing reverse mortgage at the time. Your best bet is to find out what your property is worth, the benefit you both can now receive under current rates and programs at your current value and determine if it makes sense to do a new loan in both your names at this time. The thing you do have going for you are today's low interest rates so its worth giving it a try.

You can't both be on the loan because all borrowers must be a minimum of 62 years old at the time of the loan. We don't recommend dropping one borrower to qualify because while they "can't take the house away from your wife" as you put it, they can call the Note due and payable and if she has no means to pay off the loan, she would be forced to sell the home and move and who knows what the sales environment would be like at that time. She may do very well on a sale and be able to go purchase somewhere else, she may be forced to sell the home for very little and may not have enough proceeds at that time to purchase another property.

We advise borrowers to think long and hard before getting a reverse mortgage where one borrower has to come off the loan for qualification. Some justifying reasons borrowers have given us in the past which makes sense include adequate insurance on the older spouse to completely pay the reverse mortgage loan in full; the fact that the borrowers owned a second home that the younger spouse intended to sell the primary home to move into on the passing of the older spouse anyway; and imminent foreclosure which would mean that the couple would lose their home without the reverse mortgage and the younger spouse intended to move to be nearer to family upon the passing of the older spouse.

There may be other reasons which would make this action right for you, but you do need to understand that the loan will be due and payable as soon as the borrower on the loan stops living in the property as their primary residence due to moving out or passing. Without a good alternative plan in place, you do not want to have the remaining spouse have to face foreclosure if she is not able to refinance the loan or sell the property with adequate proceeds to live comfortably elsewhere at that time.

There are many taxing authorities that do allow for tax deferral programs – however, there is typically a catch. In most states, if a person enters in to a tax deferral arrangement with their taxing authority, then that tax deferral automatically takes a first lien position on the property. The problem with this, as it relates to a reverse mortgage, is that it is a violation of the terms of the mortgage to have any lien on the property that supersedes, or takes the place of, the first lien position held by the reverse mortgage lender.

As a result, most tax deferral programs do not qualify under the loan terms for reverse mortgages. There are two states that I know where it is acceptable for a reverse mortgage borrower to enter into a tax deferral program: Oregon and Massachusetts. The reason why these two states are acceptable is that they specifically do not take a first lien on the property with their tax deferral agreement.

However, while tax deferrals are not allowed for most states, we always encourage people to look into local tax exemptions – which may help to significantly reduce your property tax obligations. I hope that this information has been helpful. Please let me know if you have any additional questions that I can assist you with.

Hi Maria, You can begin your application process 60 days before you turn 62 years of age, but you cannot close the loan prior to your 62nd birthday.

Hi Carol- You packed a lot into a very short comment/question! Any time a loan has a single repayment instead of requiring equal monthly payments over a period of time, it is considered a "balloon" payment. Not all balloons are equal though. The reverse mortgage requires a single repayment when a qualifying event occurs. That qualifying event could be the death of all borrowers originally on the loan, none of the borrowers are still living in the home as their primary residence, the borrowers are not paying their taxes or insurance, the borrowers sell the property, or the borrowers are not maintaining the home. However, unlike a traditional forward mortgage with a balloon payment, as long as you do continue to meet the conditions of the loan mentioned above, there is no set date when the balloon comes due which would force the borrowers to scramble to repay it. The reverse mortgage is intended to be the last loan you will ever need, allowing you to live the rest of your life in your home with no monthly mortgage payment. But you are correct, the equity does decrease while the debt increases as long as there are no periods of phenomenal appreciation and you are not making repayments on the loan. (...Continue reading on making payments) The loans come with adjustable rate and fixed rate options. Borrowers can choose the program that best suits your needs but the fixed rate option requires that you take all the funds in the beginning while the adjustable rate gives you the additional options to keep the funds in a line of credit or take a monthly payment as well as take a lump sum, or a combination of any or all of the above. With any of the programs you can repay any or all of the loan at any time without penalty. There is a difference though when making prepayments between the fixed rate and the adjustable rate loans.

The fixed rate reverse mortgage is a "closed-end" instrument that does not allow for further draws. In other words, once you pay a portion of the loan down, you would not be able to re-borrow those funds later without doing a new loan. On the other hand, the adjustable rate line of credit would allow the borrower to make multiple draws up to the remaining limit at any time. Borrowers should take all of this into consideration when determining which program best suits their needs.

This is a great question. The reverse mortgage program is not intended to be used as a renovation program. Some lenders do offer the HUD/FHA-insured loan program known as the 203-K loan which is intended exactly for just that purpose. However, since it is a "forward" loan and not a reverse mortgage, it does require a completely different qualification and monthly payments.

Now having said that, reverse mortgage borrowers can get what is known as a "repair set aside" if they are unable to finish all required repairs prior to close to complete certain approved items. There are restrictions on which repairs may be done after close and the amount of the money which can be set aside to complete the repairs. The amount available for set-aside fluctuates with the amount of money the borrower is receiving from their loan up to the HUD maximum of 15% of the maximum claim amount - which is the appraised value or the HUD Lending Limit, whichever is less. Depending on the type of repair, the lender may need a statement from the appraiser to determine what the repairs should cost or they may require bids from licensed contractors if they feel it greater than the appraiser's expertise to determine this amount. For this reason, borrowers who are aware of needed repairs should make their originator aware of those repairs right away. This way, the originator can let the borrowers know if the necessary repairs can be done after closing or must be done before the lender will issue the funds. In many instances it makes all the difference in the world.

You have no need to worry. The reverse mortgage is a non-recourse loan and that means that the lender can only look to the property to repay the loan. The lender cannot go after your grandmother's estate or you as the heir for any shortfall after the sale of the property. You can rest easier knowing that there will be no further recovery actions on this loan. I wish you the best of luck.

There are many excellent sources of information available for borrowers explaining the program in a factual, non-sales format. The reverse mortgage is exactly what it is proposed to be, it is a loan which requires repayment at some point in the future upon given repayment requirements. She needs to know that it is not "too good to be true", as you will be accruing interest and the lenders and HUD do still expect you to maintain the home in a reasonable fashion and to keep the taxes and insurance current. Other than that, you can live in your home for the rest of your lives and never make another monthly mortgage payment. The problem with reverse mortgage reporting is that what most people get is the author's personal bias when they read about the program.

If that author likes the program, the review is typically glowing and may read more like a sales pitch. If they don't like it, it can be wrought with inaccuracies and we've seen some extremely poor reporting from some otherwise "reputable" names. Reverse mortgages seem to be one of the topics into which a lot of journalists love to make sensational articles, but then when you really look at their facts they can be sadly mistaken. As you, yourself have found, you've already found one advisor who has formed an opinion that he doesn't like the product - but he doesn't even know why!

Reverse mortgages can be expensive and so we tell people to look at all the options. They are not a good short-term solution and are meant to be the last loan you will ever need. We have saved homes for people, improved their lives and have made many folks extremely happy with their reverse mortgages. But having said that, we acknowledge that reverse mortgages are not for everyone. It has to be right for you.

You can get information directly from the HUD Website which includes links to several informational booklets from such notable experts as the National Council on Aging. I think the HUD site does a good job of explaining things without injecting a personal bias, one way or the other.

All good questions. Once the last reverse mortgage borrower permanently leaves the home (and in this case, since there is only one) then the loan does become due and payable. The lender or the lender's servicer will work with the borrower or the borrower's heirs to give them ample time to sell the home, refinance it or pay the loan off with other proceeds. The amount owed would be the outstanding balance plus interest and any fees owed plus any amounts the lender was forced to advance, if any.

The reverse mortgage is a non recourse loan. What this means is that if the borrower lived in the home long enough so that the sale of the home was not sufficient to pay off the entire amount owed, the lender can look nowhere else for the repayment of the debt. At a time when either the interest over a long period with no payments and the falling property values combined can easily leave a home with no equity (many borrowers who make monthly payments are finding themselves upside down on property values), borrowers and their heirs are protected in that the only security the lender can look to is the property itself.

This is an excellent question. Borrowers have to make this decision every day when deciding whether or not to refinance a loan and you really need to consider all of the pros and cons to determine which is the right path for you. If you refinance, you will save $200 per month, but then you will raise your mortgage balance and begin payment on a new 30 year loan. If you look at just the hard numbers, it will take over 22 months at $200 just to recoup your initial $4,500 investment. That does not take into consideration the additional interest that you would be paying on the higher loan balance (not a lot, but an additional $240 or so in the first year).

Since you pay the most interest on a 30 year loan in the first years, after 8 years more money is going toward your principal reduction now that it would if you refinanced at this time. In other words, not only will your balance be higher, but it will remain higher longer. If you plan to get a reverse mortgage in the next 3 years anyway, you probably would never even recoup the cost of the refinance.

Having said that, what will $200 less payment now do for your quality of life? Only you can quantify if the lowered payment is worth it to you and your daily living situation. The numbers say don't do it for a loan you think you might keep for only 3 years or less, but numbers can't determine your living situation and whether or not $200 a month would really make a difference that is bigger to you than the bare numbers show.

One last thing I would caution. I don't know what kind of loan you currently have, but 5.375% AND $4,500 added to the principal balance sounds extremely high in today's market! If you determine that the lower payment in the short run is the way to go, I would really suggest that you shop around and compare rates. If you have the income to support a conventional loan at less than $417,000 loan amount, I cannot see any reason why you could not get a loan under 5% at that same fee structure in today's market.

Property taxes, absolutely. You can continue to deduct them since you still pay them just as you do with any other mortgage. Mortgage interest is a different situation. You really need to speak with a qualified accounting professional as we cannot give tax advice but most professionals agree that interest can be deducted with paid, not when accrued. What this means is that if you make any payments on your loan during the year, any interest you pay is deductible at the time you make that payment. However, since reverse mortgage loans are designed so that the borrowers do not have to make payments, most borrowers do not and under this scenario would not have any interest to deduct since none was paid. Some borrowers who do have the means to make payments and need some additional write-offs do meet with their accountants each November or December and determine how much they need to pay to greatly improve their tax situation. Another example of how a reverse mortgage is truly a financial tool. Learn more on reverse mortgages and tax deduction.

What HUD is saying is that the Saver program is available for all transaction types and payment plans - that HUD offers under the Standard HECM programs. The HECM Standard does not currently allow a line of credit on the fixed rate program. Therefore, the Saver program does not allow it either.

The line of credit is an "open-ended" mortgage. In other words, you can continue to go back for multiple draws. The fixed rate currently cannot accommodate an open-ended security instrument. Until such time as the HECM Standard Fixed Rate loan is available as a line of credit, it cannot be offered as a Saver product either. I'm sorry, we would love to be able to offer the line of credit in both Standard and Saver programs as a fixed rate, but it just isn't available.

Please feel free to have her give us a call, our toll-free number is 888-801-2762 or if she wants us to contact her we will be more than happy to do so. We serve many borrowers in the Bay area and have the procedures set up so that she will never have to leave her home. We would be more than happy to see to it that she receives excellent service for the reverse mortgage program which best suits her needs.

Rates have been going up lately. Lenders were able to pay more of borrowers' fees just a short time ago due to secondary marketing conditions which have changed dramatically for these loans just in the last 45 days. However, HUD did introduce the HECM Saver loan as a way to lower fees for borrowers who did not need as much money and did not want to pay as much on the up front-mortgage insurance last October and the Saver program does lower the single largest fee on most HECM loans, the Up-Front Mortgage Insurance Premium (UFMIP). The UFMIP alone for a Standard HECM on a property valued at $625,000 is $12,500.The UFMIP for a comparable HECM Saver is just $62.50.

However, there are other things you need to consider. The HECM Saver program has not been around long enough for secondary market investors to get a good enough feel for many of the factors that make them comfortable enough to readily buy the loans. They do not know how long the loans will remain outstanding and there is not yet a large pool of the product to gather any meaningful statistics so therefore their full acceptance with investors is still unknown. What this means to you the borrower is that the rates will be higher on the HECM Saver product and the pricing, or the fees charged by lenders, will be worse to the consumer (at least for the time being). The end result? I am certain you can lower your fees to $8,000 or less if you switch to the Saver program, but as you stated, you will get less money and the rate will be more along the line of 5.25% (this is not quoted as an APR) rather than the 4.99% you are looking at now. You can compare the amortization schedules of both programs and determine which better meets your needs.