What is a Reverse Mortgage & How does it work?
The reverse mortgage is a national program for homeowners age 62 and older, which enables you to access your home's equity without a monthly repayment. (You must maintain property taxes and homeowners insurance)
The reverse mortgage is safe and is Government-Insured by the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD).
How much can you qualify for?
Access our free reverse mortgage calculator or call us Toll Free (800) 565-1722
Does the lender take title to my property?
No, you retain the same ownership and title that you have today. The lender puts a lien on the property just as they would with a regular forward mortgage which is paid off when you sell your property, or when you pass and your heirs inherit and they can pay off the loan with another loan or other funds.
When does the Reverse Mortgage need to be paid off?
When you sell the property or no longer occupy your home as your primary residence for a period of 12 months or longer.
What does the lender expect from me?
You must maintain the property in reasonably good condition. You must pay the property taxes and the homeowners insurance and any homeowner's association dues you may have. And of course, the lender expects you to continue to occupy the property.
I currently hold title in a Trust, can I keep it that way?
Yes you can but the lender and title company do require that they review the trust and it must be approved. If you hold title in a trust you should let your Loan Officer know up front so he/she can get a copy of the trust and have it reviewed immediately so that there are no surprises later. Most trusts are prepared with lenders and their requirements in mind so they are not a problem but it is best to know as early on as possible.
Do I need to own my house free and clear, or can I get a reverse mortgage if I already have a loan on my house?
You do not need to own your home free and clear to get a reverse mortgage. The proceeds can be used for any purpose, but any existing liens on the property must be paid off at closing. If the reverse mortgage is not large enough to cover your existing loan, you can still get the reverse mortgage by bringing in the additional funds from another account and still never have to make another house payment!
Will my heirs still receive an inheritance?
Yes, after the balance of your reverse mortgage is paid off, all remaining equity will go to your heirs. One of the forms we provide you with before you close your loan is an amortization schedule so you will always know the principal balance of your loan, year by year. How much equity will remain will Depend on such variables as how much money you draw, how long you stay in your home, home appreciation your home experiences and interest rates (if you have a variable interest rate loan).
Sounds great so far, what is the down side of a reverse mortgage?
While the reverse mortgage allows you to age in place and has no recourse, you are spending what has typically become a portion of the inheritance people have historically left to their heirs. With the changing of people's life expectancies, people no longer work until they are 62 and then pass at 70 leaving an estate with a paid off mortgage for their heirs. Now, people are living longer and need an additional source of income to help fund their retirement as social security is not equipped to fulfill all their needs.
The reverse mortgage is an excellent and viable retirement tool but many seniors find it better to talk to their families early on in the decision making process. Most family members are not equipped to fund their family needs as well as those of their parents and see reverse mortgages as welcome vehicles for their senior family members, however, communication is highly recommended.
You said minimal credit qualifications, what if I've had a bankruptcy?
Bankruptcies are typically not a problem and there is no time limit after a bankruptcy has been discharged. However, if you are currently in a Chapter 13 Bankruptcy (where you're making payments), then you have to be able to show that you have been making payments on time for a period of 12 months or more. The credit requirements are that you are not currently delinquent on a federal debt (SBA Loan, Student loan, FHA home loan, etc).
How do I determine if the Reverse Mortgage is the right loan for me?
The reverse mortgage, especially the HUD Home Equity Conversion Mortgage (HECM) can be a very expensive short-term loan and may not be right for all borrowers. There are many things to consider. With the costs of the loan and the government insurance, if you only need the loan for a very short period of time, a reverse mortgage may not be the right option for you. On the other hand, if you intend to occupy your property for a long period of time and wish to never make another payment for life while accessing your equity in the form of monthly payments, a line of credit, or both, then a reverse mortgage may be perfect for you!
How can I choose to take the reverse mortgage proceeds and are there any restrictions on what I use the funds for?
This is one of the great features of the loan...you have choices!
- You can take a lump sum, that is, all the cash up front.
- Monthly Income (Tax-Free, Check with your Tax Advisor)
- A Credit Line which grows monthly on the unused portion
- A combination of any of the above, cash, income and credit line
What are the interest rates for reverse mortgages?
Rates vary by program. For example, just within the HUD HECM loans you have fixed rates, monthly adjustable rates, and annual adjustable rates, with the adjustable rates, you have different margins available depending on the secondary market conditions at the time you obtain your loan.
The one thing that you do need to remember is that all HUD rates are regulated in the same manner, that is, the index that drives the rate is the same for all lenders. The margin that they add to the index is what can vary, and this can be driven by the mortgage market. The rates for proprietary programs vary with the programs. We have access to many lenders products, not just one or two, so we can be sure to match you up with the program which best suits your needs. Check current interest rates here »
What is a Counseling Certificate?
A Reverse Mortgage Counseling Certificate is the certificate that you receive once you have attended a counseling session conducted by a certified reverse mortgage counselor. The counseling is specific to the program you have selected (whether it be the Government HECM program or one of the private proprietary products available) and can be done either face to face or by phone. We will be happy to give you the name and number for counselors who can offer the counseling for your desired product and we will be happy to assist you in setting up your appointment. Once you have completed the counseling, you will receive a certificate which the lender will require to proceed with your loan. The certificate ensures that you have an understanding of reverse mortgage loans in general and your program specifically.
What are the Fees?
The fees that you will pay on a Reverse Mortgage loan are similar to a standard or “Forward” mortgage with the exception of the Mortgage Insurance Premium. Our Reverse Mortgage Calculator provides a net estimate of the anticipated closing costs. The difference on the Reverse Mortgage is the 2% Mortgage Insurance Premium that is charged by FHA in order to provide you with the protection of the Government Insurance. Learn more about Reverse Mortgage Fees »
Will I pay Taxes on these proceeds?
Funds received from your loan are generally considered to be *nontaxable as the money received is not income earned. You should always consult your trusted tax advisor.
Is the interest added to my balance tax deductible?
*Only when a payment is actually applied to your loan, or when the balance is paid in full. Learn more about interest deductions »
Can I make a payment back?
Yes. While a Reverse Mortgage does not require regular scheduled monthly payments, the program does permit a borrower to make voluntary partial or full payments on the loan. As stated before, there is no penalty to paying down or off your loan at any time. Also, if the loan is a fixed rate, funds submitted for prepayment cannot be re-borrowed at any point during the life of the loan, and the revolving credit feature does not apply. Learn more about making payments »
What if I don’t want to take the full amount that I qualify for?
Reverse Mortgage Loans are not subject to prepayment penalties and therefore you can repay any portion of the excess proceeds you received at closing at any time to lower your balance, or you can choose a line of credit and only advance the portion of funds that you wish at closing.
What happens if the interest accrued exceeds the value of our home?
Since a HECM is insured by HUD, you are guaranteed that you and your heirs will never have to pay more than the property is worth in a bona-fide sale at time of maturity on the loan. Learn more about Non-Recourse loans »
Why do available proceeds vary from Lender to Lender? I thought that all Reverse Mortgages are the same?
The reason why proceeds vary from Lender to Lender is because each individual company sets different rates and margins for the products they are offering. Each Lender has the ability negotiate / set it's own fees and margins, and it is always a good idea to compare your options.
Will the proceeds affect Social Security or Medicare?
Proceeds will not affect public benefits such as SS or Medicare, but can affect "need based" programs such as Medicaid / Medical. Learn more about Medicaid & SSI »
What do I need to give my All Reverse Mortgage Specialist?
- Copy of your driver's license or other picture ID
- Copy of your social security card
- Copy of your Homeowners Insurance Policy Declaration Page
- Copy of your Mortgage Statement(s) (need all if any)**
- Copy of your Trust (if your property is in a trust)**
Copy of the Power of Attorney if someone else will be signing for you**
- Conservator information if you have a court appointed Conservator**
- Bankruptcy discharge papers, if applicable**
**These items are only required if they apply to you.
If your home is a condominium, I will need the contact information for the holder of the Master Insurance Policy.
*Always consult your tax professional.
Learn more about reverse mortgages in our Plain English Guide or call the experts at (800) 565-1722