Reverse Mortgage Frequently Asked Questions
How do I qualify for a Reverse Mortgage?
To be eligible, all homeowners must be at least 62 years of age; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse mortgage; and must live in the home. There are no credit or income requirements.
What costs are involved in a Reverse Mortgage?
A reverse mortgage includes many of the same costs as a traditional mortgage. In most cases, the only out of pocket expense is the cost of the appraisal, usually $350-$450, paid at the time of inspection. Other costs are normally financed as part of the reverse mortgage and are regulated by the FHA.
One cost unique to a reverse mortgage is FHA mortgage insurance which guarantees that you will never owe more than what your home is worth.
How much money can I receive?
This is based on a very specific formula including: 1) your age; 2) type of Reverse Mortgage; 3) current interest rates; 4) location of the home; 5) appraised value; and FHA's lending limits in your area.
Do I need to take the money all at once?
No, depending on the type of Reverse Mortgage you select, the cash you get from a Reverse Mortgage can be paid to you in several ways, and---if your situation changes---you can always restructure it!
1) All at once, in a single lump sum of cash;
2) A regular monthly cash advance;
3) A credit-line account; or
4) Any combination of these alternatives.
Let's say I choose the line of credit option. Do I have to use up my entire line of credit?
No, you do not have to use it up---and the unused portion grows over time, at a guaranteed rate----continually increasing the amount of cash available to you---at no cost to you or your heirs!
Can you give an example of how the line of credit grows?
Let's say you have a line of credit for $150,000 and you utilize only $25,000 of it. This leaves a balance of $125,000. If you do not use the line of credit until one year later, and your “growth rate” is 6%, your available credit line would be 6% higher. You would then have $132,500 available versus $125,000! You will be informed of your growth rate before the loan is written.
After getting a Reverse Mortgage, who owns my home?
You do. You retain ownership to the property and the lender is never added to the deed. Remember, this is just a lien like a traditional home loan. You may also leave your home to whomever you wish.
So, if I take a Reverse Mortgage loan, I could still have an estate that I can leave to my heirs?
Yes, when the outstanding loan balance is paid, any remaining equity belongs to you or your heirs! And the fact that you are remaining in your home, can actually preserve and enhance the estate for your heirs!
Are the heirs required to sell the property to repay the Reverse Mortgage loan?
No. Your heirs may pay the balance due and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage and keep any excess proceeds.
When will I have to pay the principal and interest costs associated with this loan?
You will never be required to make any principal or interest payments until one of the following occurs: (a) the last surviving borrower passes away or sells the home; (b) all borrowers permanently move out of the home; (c) the last surviving borrower fails to live in the home for 12 consecutive months; (d) you fail to pay property taxes or insurance; or (e) the property deteriorates beyond normal wear and tear.
How much is the interest rate for a Reverse Mortgage?
Your interest rate will depend on the specific product you select. Reverse mortgages are available with monthly adjusting, annual adjusting, or fixed rates.
What if the value of my home decreases before the loan is paid off?
When the loan is repaid, if the value of the home is less than the outstanding balance of the loan, neither you nor your heirs will pay back a single dollar of the difference. Conversely, if the home is sold for more than the outstanding balance---you or your heirs will receive the difference! You can never owe more than what your home is worth at the time the loan is repaid.
Reverse Mortgages are referred to as a "non recourse" loan. What does this mean to me?
This means that the lender can derive repayment only from the proceeds of the sale of the property. They cannot seek repayment from any of your other assets---or from your estate.
Won't my heirs object to my "spending their inheritance?"
Today, more children are suggesting to mom and dad that a reverse mortgage is a great thing to pursue. Adult children have a family of their own and usually can not afford to take care of both their parents and their own family. They have to save for their own retirement and for their kid’s college education, etc. And with proper advanced estate planning you will not be spending their inheritance---you will be preserving and protecting the estate for your heirs! In other words, if the proceeds from these loans are properly managed, these loans could actually “ease” the burden on the heirs; and potentially offload and preserve wealth for the heirs.
How could a Reverse Mortgage be utilized to offload and preserve wealth for my heirs?
This is a burgeoning concept among financial planners. A wealthy couple withdraws the equity from their home, reducing the value of their estate. They make a gift of money to grandchildren through 529 college savings plans----or---as outright annual gifts. They fund an irrevocable insurance trust that buys more life insurance. The trust keeps the insurance out of their estate. When the couple dies; their children receive the life insurance proceeds tax free. They then use these proceeds to pay off the Reverse Mortgage and keep the house, or they sell the home to pay off the Reverse Mortgage.
What if my home needs repairs? Could that prevent me from getting a Reverse Mortgage?
As part of the process of getting a Reverse Mortgage a property appraisal is performed by a FHA-licensed appraiser. The appraiser gives a listing of any repairs that would be required to bring the home up to FHA property standards. A certain amount of money is then set aside until those repairs can be performed, usually after the Reverse Mortgage is in place.
It all sounds good, but how safe are they---really?
Today, they have become a very safe income option with many safeguards.
- Independent counseling required
- Limits on the interest rate and costs
- Limit on the repayment amount - can never exceed the vale of the home
- Advance disclosure of the costs involved
How do I get started?
That's easy! Call me today!
1-888-408-5454
Your Reverse Mortgage Specialist