What is a Reverse Mortgage?
A Reverse Mortgage is a loan that enables Senior Homeowners, age 62 and older, to convert part of their homes equity into tax-free* income – without having to sell their home, give up title to it, or make monthly mortgage payments. Homeowners are required to continue to make monthly or other periodic tax and insurance payments, and may risk default if the payments aren’t made. The home must be also be maintained in a satisfactory manner. The loan becomes due upon occurrence of a Specific Maturity Event. A couple of which are: upon the Death of A Borrower(s) or Surviving Spouse or when the property is no longer the Principal Residence of a Surviving Spouse or Borrower(s). Please call for a complete listing of all Maturity Events.
How is a Reverse Mortgage like a home equity loan? How is it different?
Both a Reverse Mortgage and a home equity loan use the equity you have built up in your home to provide you with readily available cash.They differ in that with a home equity loan you must make regular monthly payments of principle and interest. However, with a Reverse Mortgage you do not make any required monthly mortgage payments for as long as you stay in the home. Homeowners are required to continue to make monthly or other periodic tax and insurance payments, and may risk default if the payments aren’t made.
Who can qualify for a Reverse Mortgage?
Seniors 62 years of age or older may qualify. You must own and occupy the property as your Principal Residence. All mortgages and liens must be paid from the proceeds of the Reverse Mortgage. You must not be delinquent on any federal debt. Other Qualifications and A Financial Assessment will apply. Please call us for all the details.Lenders have now begun a Financial Assessment that would qualify borrowers for the Reverse Mortgage. The lenders just want to make sure that you will be able to pay your Real Estate Taxes and Property lnsurances going forward. The purpose of the financial assessment is also to evaluate the borrowers willingness and ability to meet financial obligations and comply with the mortgage requirements as well as to determine whether and under what conditions the borrower meets FHA eligibility criteria. Please call 888 220-4537 for current Financial Assessment information and how it may affect your qualification for a Reverse Mortgage.
Are all Reverse Mortgages the same?
No, below are the basic types of Reverse Mortgages:
1. Federally-insured Reverse Mortgages. Known as Home Equity Conversion Mortgages (HECM), they are insured by the U.S. Department of Housing and Urban Development (HUD). They are widely available, and can be used for almost any purpose.
2. Proprietary Reverse Mortgages Proprietary Reverse Mortgages Proprietary Reverse Mortgages do exist. A Jumbo Program is available and usually makes sense on a home valued over $1,600,000. Please cali for details.
What kinds of homes are eligible for a Reverse Mortgage?
First and foremost, the Reverse Mortgage must be on the borrower(s) primary residence, that is, where they live most of the year. Most Reverse Mortgages are taken on single family, one-unit homes. Also accepted are two-to-four unit buildings that are owner-occupied. Condominiums, Manufactured Homes and Mobile Homes (that own the land) are also accepted. Some restrictions do also apply.
When the loan is due, will I ever owe more than my home is worth?
No. If the borrower or heir(s) does not wish to retain ownership of the property upon loan maturity, the borrower or heir(s) will simply sell the property. In the event the borrower or heir(s) decide to keep the home upon loan maturity, the borrower or heir(s) will need to refinance and pay-off the Reverse Mortgage Lender.
Are Reverse Mortgage Interest Rates Fixed or Variable?
The Senior Equity Group offers both Fixed and Variable Interest Rate Programs.
I still owe money on a first or second mortgage. Can I still get a Reverse Mortgage?
Yes. You may be eligible for a Reverse Mortgage even if you still owe money on a first or second mortgage. The funds you would receive from the Reverse Mortgage would be used to pay off whatever existing mortgages you have on the property. Your proceeds from the Reverse Mortgage would be the difference between your total proceeds minus Closing Costs, Set-Asides and the Pay-Offs of your Liens and Encumbrances (1st and 2nd Loans).
What are the advantages of a Reverse Mortgage?
There are many. Here are a few of the most significant:
• Remain independent. A Reverse Mortgage allows you to remain in your home and retain home ownership.
• Stay in your home.
• No monthly mortgage payments required. You are not required to make any monthly mortgage payments and your Reverse Mortgage does
 not become due until the occurrence of a Specific Maturity Event. Homeowners are required to continue to make monthly or other periodic
tax and insurance payments, and may risk default if the payments aren’t made. You must also maintain the property in a satisfactory manner.
• Tax-free money.Because the money you receive from a Reverse Mortgage is not considered income. A Reverse Mortgage may affect
eligibility for some government programs. Specifically, SSI and Medicaid may be affected. Please consult with your tax professional.
• Freedom and flexibility. The money you get from a Reverse Mortgage is yours to use in any way you choose.
I’ve heard that with a Reverse Mortgage the lender would own my home. Is this true?
It’s absolutely false. The borrower retains title to the property. The Reverse Mortgage lender is merely extending a loan to the borrower.
Because the homeowners retain title, they remain responsible for the payment of property taxes, hazard insurance, and maintaining the home in reasonable condition – just as they would with a standard first mortgage or home equity loan.
Can I refinance a Reverse Mortgage, as I would be able to do with a traditional home mortgage?
Yes. Refinancing can make sense if your home either increases in value, the interest rates drops or the maximum lending limit increases. Keep in mind that when deciding to refinance a Reverse Mortgage, it is important to compare the amount of benefit versus the cost of the loan before making this decision. The amount of benefit received should be twice the amount of the cost to refinance the loan.
Can a Reverse Mortgage Lender take my home away if I live too long?
Your Reverse Mortgage loan will not become due until the occurrence of a Specific Maturity Event. Old age is not a Maturity event. Please call us for Specific Maturity Event details.
How do you determine the amount of cash I am eligible for?
The amount you can borrow depends on several factors, including your age, the type of Reverse Mortgage you select, current interest rates, the appraised value of your home and FHA’s lending limits for your area. In most cases, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.
Are there any limits on how I use the money I receive from a Reverse Mortgage?
You can use the money for virtually anything you choose, from daily living expenses, home improvements, healthcare expenses, paying off existing debts, or simply enhancing your retirement years. For many people, the money provides a “financial security blanket,” in case unexpected expenses arise.
It is important to know that with adjustable rate mortgages, an increase in the interest rate could affect the amount of money available to borrow in the future and the amount of money owed when the loan becomes due
Is there a choice in how I receive the cash from my Reverse Mortgage?
Most definitely. With most Reverse Mortgages you have a wide range of payment options, one of which may be ideal to meet your financial needs.
You can choose to receive the money all at once, as a lump sum.
You can receive equal monthly payments as long as one of the borrowers lives and continues to occupy the property as a principal residence.
You can choose to receive equal monthly payments for a fixed period of months.
You can get a line of credit; which allows you to take funds at times and in amounts of your choosing until the line of credit is exhausted. This is the most popular option, chosen by more than 60% of Reverse Mortgage borrowers.
You can opt for a combination of line of credit with monthly payments for as long as the borrower remains in the home.
Or, finally, you can choose a combination of the above.
Can I get a Reverse Mortgage on a second home or resort property I own?
Unfortunately no. Reverse Mortgages may only be taken out on your primary residence.
Would a home that is in a “living trust” be eligible for a Reverse Mortgage?
Yes. In most cases a homeowner who has put his or her home in a revocable living trust can usually take out a Reverse Mortgage. A review of the trust documents would be conducted by the Reverse Mortgage lender to determine if anything in the living trust would be unacceptable.
When will I have to pay the principal and interest costs of this loan?
Your Reverse Mortgage loan becomes due when one or more of the following conditions 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) the borrower fails to pay property taxes or hazard insurance; (e) the borrower does not maintain the home in reasonable condition.
What is a non-recourse loan?
A non-recourse loan is a home loan in which a lender may look only to the value of the home for repayment of the loan; no other assets may be attached if the loan balance grows beyond the subject property home value.
What fees are involved in a Reverse Mortgage?
Most Reverse Mortgages have an origination fee, third party closing costs (such as appraisal, title and escrow), insurance, and a monthly servicing fee. These charges can be paid from the proceeds of the Reverse Mortgage, resulting in no immediate burden to the borrowers; the costs are added to the principal and paid with interest when the loan becomes due. The borrow might have to pay appraisal and HUD counseling costs out of pocket.
What is “TALC” and why should I know about it?
TALC is short for “Total Annual Loan Cost.” It combines all of the costs of a Reverse Mortgage into a single annual average rate and can be very useful when comparing one type of Reverse Mortgage to another. If you are considering a Reverse Mortgage, be sure to ask the lender and counselor to explain the TALC rates for the various Reverse Mortgage products.
Would you like more information?
Our expert staff is here to provide you advice and direct answers.
Give us a call Toll Free or email jalpino@theseniorequitygroup.com.Call Toll Free 1(888) 220-4537 |
