Obtaining a reverse mortgage loan is a big decision. It’s normal for you and your family to have questions and hopefully the answers below can help put your mind at ease. If you don’t see your question, feel free to call one of our Reverse Mortgage Advisors. They’re highly knowledgeable and are here to offer impartial advice. When you’re ready to apply, they’ll work with you through every step of the process. Call today at 866 751.6105
Question and Answers about Reverse Mortgage Loans
What is a reverse mortgage loan?
A reverse mortgage is a loan that allows you to access a portion of your home equity without having to make monthly mortgage payments.1 With this type of loan, you maintain the title to your home. The loan typically becomes due when the last borrower(s) permanently leave the home or the borrower(s) fail to meet the loan obligations1. Provided the home is sold to repay the loan, the borrower will never owe more than the appraised value of the home.
If no monthly payments are required, how is my reverse mortgage loan paid back?
To pay off the loan balance, you or your heirs can sell the home or you can pay the loan balance and keep the home.
How do I qualify for a reverse mortgage loan?
To qualify, you must be age 62 or older and be the titleholder to your home. In addition, you must have sufficient equity in your home and you must meet financial eligibility criteria as established by HUD.
What if I have an existing mortgage?
If you currently have a mortgage, that’s okay. However, a portion of the funds you receive from your reverse mortgage loan (or funds from another source) must be used to pay off any existing mortgage you have on the property at closing.
Is my home eligible?
Your home must be a single-family residence, a 2- to 4-unit dwelling, a FHA-approved condominium, or a manufactured home that meets FHA requirements.
Will I still own my home or will I lose it?
You will still own your home and you can stay in it for as long as you wish, provided you continue to occupy your home as your primary residence, pay your property taxes and insurance, and maintain the home according to FHA requirements.
Are there property and insurance requirements?
Since you still own your home with a reverse mortgage loan you’re responsible for the general maintenance and upkeep as well as for paying all ongoing property taxes and insurance. You can often pay for these expenses with funds from your reverse mortgage loan.
What types of loans are available?
All of our loans are Home Equity Conversion Mortgages (HECM). Always ask to see a comparison of various loans so you have a complete understanding of what is available. Your Reverse Mortgage Advisor can objectively help you decide which of our FHA insured products best fit your needs.
How much of my home’s equity can I access with a reverse mortgage loan?
The loan amounts vary based on a number of factors including which reverse mortgage loan product you choose. The amount you can receive depends on the age of the youngest borrower, current interest rates, and the lesser of the appraised value of your home, the sale price or FHA maximum lending limit. You may need to set aside additional funds from the loan proceeds to pay for taxes and insurance.
How can I use the money?
After paying off any existing mortgage, the money you receive from your reverse mortgage loan can be used any way you choose such as paying for medical expenses (including in-home care), home improvements, and living expenses. There are no limitations or restrictions, once you receive the net proceeds.
What costs are involved with a reverse mortgage loan?
As with any loan, there are closing and other costs. However, most fees can be financed as part of the loan. The HUD counseling fee is the only out-of-pocket cost.
Will I have to pay any taxes?
Generally, money received is not considered income and should be tax free, though you must continue to pay required property taxes. Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
Will this loan affect my Social Security or Medicare benefits?
HECM reverse mortgage loan payments typically do not affect your Social Security or Medicare benefits. However, regulations vary for the Federal Supplemental Security Income program and for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps. We suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how HECM payments may affect your particular situation.
How will I receive the available funds?
The most common way is to draw from a line of credit to use at your discretion. However, you may also choose to receive a single lump sum2, regular monthly installments, or any combination of these options.
Will my family or estate ever owe more than the value of my home?
No. With a FHA-insured3 reverse mortgage loan you’ll never owe more than the appraised value of your home when the loan comes due, so long as the home is sold to repay the loan.
What if I want to leave our home to the kids?
You can still leave it to your children, or to anyone you choose. When the loan becomes due, you or your heirs have the option of paying off the full balance of the loan and keeping the home.
Will I incur any penalties if I decide to pay back the loan early?
No. You can pay back the loan at any time without the worry of being penalized.
If my parents have a reverse mortgage, what should I do in the event of their passing?
You should first contact the loan servicer to notify them that the borrower(s) have passed away. You can typically find the servicer’s contact information on the monthly statement. Once the loan servicer has been notified, they will help you (the heirs) with next steps.
1 You must still live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to Federal Housing Administration requirement. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
2 Only available for fixed rate loans.
3 Federal Housing Administration (FHA) mortgage insurance premiums (MIP) will accrue on your loan balance. You will be charged an initial MIP at closing. The initial MIP will be 2% of the home value but not to exceed $12,723. Over the life of the loan, you will be charged an annual MIP that equals .5% of the outstanding mortgage balance.