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| About Reverse Mortgages; For your information only. We'll refer you to
a licensed loan originator in your state. |
We've found through our mitigation process many
seniors in financial trouble with mortgages and other debt.
This information is provided to educate you on the various
aspects of reverse mortgages. |
A
reverse mortgage enables older homeowners (62+) to convert part of the
equity in their homes into tax-free income without having to sell
the home, give up title, or take on a new monthly mortgage payment. The
reverse mortgage is aptly named because the payment stream is
“reversed.” Instead of making monthly payments to a lender, as with a
regular mortgage, a lender makes payments to you. Below are some common
questions asked by consumers about reverse mortgages.What
are My Payment Plan Options?
You
can choose to receive the money from a reverse mortgage all at once as
a lump sum, fixed monthly payments either for a set term or for as
long as you live in the home, as a line of credit, or a combination of
these. The most popular option – chosen by more than 60 percent of
borrowers – is the line of credit, which allows you to draw on the loan
proceeds at any time. My Understanding is that the Unused Balance
in the Line of Credit Option Has a Growth Feature. Does that Mean I'm Earning Interest?No,
you're not earning interest like you do with a savings account. The
growth factor is taking into consideration that your home has
appreciated in value over the past 12 months and that you are one year
older. And just to clarify, the growth feature only applies to the FHA
Home Equity Conversion Mortgage program. How Much Money Will I Get?No
matter which reverse mortgage product you choose, the amount of funds
you are eligible to receive will depend on your age (or the age of
the youngest spouse in the case of couples), appraised home value,
current interest rates, and the lending limit in your area. In general,
the older you are and the more valuable your home (and the less you owe
on your home), the more money you can get. Does My Home Qualify?Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976),
condominiums, and townhouses. In general, co-ops are not allowed. Only the Financial Freedom "Cash Account"
program is available on co-ops in New York City. How Can I Use the Proceeds from a Reverse Mortgage?The proceeds
from a reverse mortgage can be used for anything, whether its to
supplement retirement income to cover daily living expenses, repair or
modify your home (i.e., widening halls or installing a ramp), pay
for health care, retire existing debts, buy a new car or take
a "dream" vacation, cover property taxes, and prevent
foreclosure.Are There Any Special Requirements to Get a Reverse Mortgage? As long as you own a home, are at least 62, and have
enough equity in your home, you can get a reverse mortgage. There are no special income or medical requirements. What If I Have An Existing Mortgage?You
may qualify for a reverse mortgage even if you still owe
money on an existing mortgage. However, the reverse mortgage must
be in a first lien position, so any existing mortgage must be paid off.
You can pay off the existing mortgage with a reverse
mortgage, money from your savings, or assistance from a family member
or friend.For
example, let's say you owe $100,000 on an existing mortgage. Based on
your age, home value, and interest rates, you qualify for $125,000
under the reverse mortgage program. Under this scenario, you will be
able to pay off ALL the existing mortgage and still have $25,000 left
over to use as you wish. If,
however, you only qualify for $85,000, then you would need to come up
with $15,000 from your savings to get the reverse mortgage. Even then,
all the money from the reverse mortgage will have been used to pay off
the existing mortgage. On the other hand, you won't have a monthly
mortgage payment.What Is the Service Fee Set-Aside?Under
most reverse mortgage programs, you will be charged a monthly
servicing fee that ranges from $30-$35 to manage your account
once the loan closes. The SFSA is an estimate of what the total
servicing fees will be over the life of the loan, by multplying your
life expectancy (converted from years into months) multiplied by either
$30 or $35. Although
it's not considered a closing cost, the SFSA can equal several thousand
dollars, which is deducted from your available loan proceeds. You
do not have access to that money, nor do you earn interest. Will
I Lose My Government Assistance If I Get a Reverse Mortgage?A
reverse mortgage does not affect regular Social Security or Medicare
benefits. However, if you are on Medicaid, any reverse mortgage
proceeds that you receive must be used immediately. Funds that you
retain would count as an asset and could impact Medicaid
eligibility. For example, if you receive $4,000 in
a lump sum for home repairs and spend it all the same
calendar month, everything is fine. Any
residual funds remaining in your bank account the following
month would count as an asset. If the total liquid resources
(including other bank funds and savings bonds) exceed $2,000 for an
individual or $3,000 for a couple, you would be ineligible for
Medicaid. To be safe, you should contact the local Area Agency on Aging or a Medicaid expert. Why Do I
Need to Get Counseling?Counseling is one of the most important consumer protections built into the program. It requires an independent third-party
to make sure you understand the program, and review alternative options, before you apply for a reverse mortgage.You can seek counseling from a local HUD-approved counseling agency,
or a national counseling agency, such as AARP (800-209-8085), National
Foundation for Credit Counseling (866-698-6322), and Money Management
International (877-908-2227). Counseling is required for all reverse
mortgages and may be conducted face-to-face or by telephone. By
law, a counselor must review (i) options, other than a reverse
mortgage, that are available to the prospective borrower, including
housing, social services, health and financial alternatives; (ii) other
home equity conversion options that are or may become available to the
prospective borrower, such as property tax deferral programs; (iii) the
financial implications of entering into a reverse mortgage; and, (iv)
the tax consequences affecting the prospective borrower’s eligibility
under state or federal programs and the impact on the estate or his or
her heirs.When Do I Pay Back
My Loan?No
monthly payments are due on a reverse mortgage while it is outstanding.
The loan is repaid when you cease to occupy your home as a principal
residence, whether you (the last remaining spouse, in cases of couples)
pass away, sell the home, or permanently move out. The amount owed can
never exceed the value of your home. Furthermore, if the home is sold
and the sales proceeds exceed the amount owed on the reverse mortgage,
the excess money goes to you or your estate.Under What Circumstances Should I Not Consider a Reverse Mortgage? Because
of the upfront costs associated with a reverse mortgage, if you intend
to leave your home within 2-3 years, there may be other less expensive
options to consider, such as home equity loans, no-interest loans
or grants that may be offered by your county government or a local
non-profit to repair your home, or a tax deferral program, if you're
having problems paying your property taxes.
Only FHA authorized brokers, lenders can offer Reverse Mortgages--If you're
ready we'll refer you to the best in the business!! |
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