Reverse Mortgages FAQs
Reverse Mortgages – Frequently Asked Questions (FAQs)
- What is a Reverse Mortgage?
- What are the advantages of a reverse mortgage?
- Who qualifies for a reverse mortgage?
- Can I use the money from a reverse mortgage any way I want?
- I heard that the lender will own my home if I get a reverse mortgage?
- Why do I have to meet with a counselor?
- I live in and own a condominium. Does that qualify for a reverse mortgage?
- What payment options are available with reverse mortgages?
- How much money can I get?
- How do reverse mortgages affect my government assistance programs?
- What if I outlive the loan - can the lender take my home away?
- How will a reverse mortgage affect my estate when I die?
- My spouse moved into an assisted living facility last year. Are we eligible for a reverse mortgage?
- I currently have an outstanding mortgage loan on my property - do I qualify?
- What are the requirements for repaying a reverse mortgage?
- I have an investment property and a vacation home - may I take out a reverse mortgage on either of these?
- What kinds of fees are there with a reverse mortgage?
- Will I have to pay any of the fees out of my pocket?
Q. What is a Reverse Mortgage?
A. A reverse mortgage is a special type of home loan that allows homeowners
62 years of age and older to turn part of their home equity into cash, without having to sell or give up title to their home. Unlike other home loans, reverse mortgages have no monthly payments; instead, the lender pays the homeowner. Almost all reverse mortgages are insured by the United States Department of Housing and Urban Development (HUD). A reverse mortgage loan is due when the last borrower permanently vacates, sells the home, or dies.
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Q. What are the advantages of a reverse mortgage?
A. There are several benefits to reverse mortgages:
- No monthly loan payments
- Greater financial security
- Additional monthly income to spend whenever and on whatever you choose
- Payments are tax-free
- Ability to stay in and never give up ownership of your home
- No credit check or financial requirements are necessary to qualify
- Repayment does not occur until the last borrower permanently vacates the home or dies
- You can use the proceeds any way you choose
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Q. Who qualifies for a reverse mortgage?
A. If you are 62 or older, own your home, and have enough equity in your home, you typically qualify for a reverse mortgage.
There are no income requirements or credit checks necessary to qualify for a reverse mortgage, but you will have to speak with an unbiased, third-party counselor before you are approved for a reverse mortgage.
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Q. Can I use the money from a reverse mortgage any way I want?
A. You can use the money nay way you want, from helping with living & medical expenses, making repairs on you home, or just putting some money away for an unexpected future expense.
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Q. I heard that the lender will own my home if I get a reverse mortgage?
A. That is 100% false. You are still the owner of the property just as you would be without a reverse mortgage. The lender will simply have a lien on the property.
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Q. Why do I have to meet with a counselor?
A. To ensure consumers understand the reverse mortgage all candidates for reverse mortgages must speak with an unbiased, third-party counseling agency either face-to-face or by telephone before they are approved. After the counseling session has been completed, you will receive a Certificate of Borrower Counseling. To prove that you have had the counseling, you must present the certificate to the
lender.
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Q. I live in and own a condominium. Does that qualify for a reverse mortgage?
A. Yes. Other types of property that qualify for reverse mortgages include single-family homes, 2- to 4-unit duplexes, townhouses and certain mobile homes.
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Q. What payment options are available with reverse mortgages?
A. You may receive a reverse mortgage payment as one lump sum, in monthly installments, as a line of credit, or as a combination of these options. If you choose fixed monthly payments, you may choose to receive them for a specific number of years or for the time you occupy your home. If you choose the line of credit option, you are free to draw on the loan proceeds at any time.
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Q. How much money can I get?
A. The amount of money you can get from a reverse mortgage depends on a few factors, namely your age (and your spouse's age if you are a couple); the appraised value of your home; the type of reverse mortgage you select; interest rates; and the county the home is located in. Typically, the older you are and the more equity you have in your home, the more money you can get.
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Q. How do reverse mortgages affect my government assistance programs?
A. Social Security and Medicare payments are unaffected by reverse mortgage payments.
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Q. What if I outlive the loan - can the lender take my home away?
A. Absolutely not. You always retain title in your home with a reverse mortgage and you never owe more than your home's value. If you outlive your loan, your reverse mortgage payment is not due either; this requirement only comes into play when the last borrower permanently vacates the home, sells it, or dies. A reverse mortgage is a non-recourse loan, which means that the lender cannot seek repayment from you, your other assets, or your estate. The house is the way the lender can seek repayment of the debt.
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Q. How will a reverse mortgage affect my estate when I die?
A. When your home is no longer your primary residence, your estate must pay back the amount you received from the reverse mortgage, along with interest and other fees, like closing costs. Any remaining equity in the home belongs to your heirs -it is up to them whether to keep the house or sell it. None of your other assets are affected by the reverse mortgage loan and the reverse mortgage debt will never be passed on to the estate or to your heirs.
When the last surviving borrower on your home dies, your heirs have two choices: they may keep the house and pay the balance of the reverse mortgage, or they may sell the house and use the proceeds to pay off the reverse mortgage balance. If they decide to keep the house, they must find a way to repay the balance of the reverse mortgage, such as through other savings or by refinancing the reverse mortgage into a traditional "forward" mortgage. If they choose to sell the house, they will collect any outstanding proceeds from the sale.
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Q. My spouse moved into an assisted living facility last year. Are we eligible for a reverse mortgage?
A. Yes. Eligibility is based on one owner occupying the house as a primary residence.
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Q. I currently have an outstanding mortgage loan on my property - do I qualify?
A. As long as the remaining balance of the loan can be paid off by the reverse mortgage, and you meet the other requirements of a reverse mortgage, yes - you qualify. For example, if you have a $30,000 balance on your mortgage, and you qualify for a $100,000 reverse mortgage loan, you can use part of your reverse mortgage to pay off your existing home loan.
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Q. What are the requirements for repaying a reverse mortgage?
A. The only requirement is that the loan be paid back at one time. You may pay the loan back penalty-free at anytime, but it is most often paid back when required - when the last borrower permanently vacates the home, sells it, or dies.
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Q. I have an investment property and a vacation home - may I take out a reverse mortgage on either of these?
A. Unfortunately, no. Reverse mortgages may only be taken out on a primary residence.
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Q. What kinds of fees are there with a reverse mortgage?
A. Most reverse mortgages have the normal closing costs associated with a mortgage. They also have a fee to the FHA for insurance and there is a monthly servicing fee.
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Q. Will I have to pay any of the fees out of my pocket?
A. No. The fees come out of the loan proceeds. With Remington Senior Funding, even the appraisal is advanced by them so there will be no up front costs to you.
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