10 Things You Have to Know About Reverse Mortgages

10 Things You HAVE to Know About Reverse Mortgages

1. What is a reverse mortgage?

A reverse mortgage is a special loan that is available to help seniors age in place. They are able to turn a portion of the equity in their home into cash, and they are not required to make monthly payments to the lender while they are still living in the home as their primary residence. Aside from not making additional monthly payments, borrowers can find many advantages to having a reverse mortgage loans. With a reverse mortgage loan, borrowers are able to use the money however they please, typically using their funds to set aside for a rainy day, home repairs, renovations or as part of their retirement planning strategy. However, borrowers have used their funds to pay for vacations, a new car, daily expenses, or even for their grandchildren’s education.

2. Who can apply for a reverse mortgage?

Homeowners who are at least 62 years of age and have equity in their home can qualify for a reverse mortgage. To see if you are eligible, please fill out your information in the reverse mortgage calculator.

3. Does my home belong to the bank?

Similar to a traditional mortgage, borrowers do not give up title to the their home with a reverse mortgage. As long as you continue to meet the terms of the loan, you do not need to worry about repayment. If you permanently leave the home, either by moving out or for medical reasons, the loan will become due. At this point, just like a traditional loan, you can sell the home and keep any equity leftover.

4. Am I still required to pay my property taxes and insurance if I have a reverse mortgage?

As with any loan, it is a part of your agreement to continue to keep up with the payments on your property taxes, home insurance and any applicable fees, such as homeowner’s association (HOA) fees. Having a reverse mortgage does not exempt you from paying your taxes and insurance on your home.

5. When do I pay back the loan?

The reverse mortgage loan is due when the last borrower leaves the home permanently or when a maturity event occurs. A maturity event is any action that occurs that can trigger the loan to go into repayment status. Here are the following maturity events that borrowers must be aware of:

• You must continue to pay for the property taxes, home insurance, and other applicable fees.

• You must ensure that the maintenance of the home is up to FHA standard.

• You must live on the property as your primary residence.

6. What homes are eligible for a reverse mortgage loan?

Because a Reverse Mortgage is an FHA loan, there are certain homes that can qualify for this loan. This includes:

• Homes that meet all FHA property standards and flood requirements.

• Single family home

• 2-4 unit home with one unit occupied by the borrower

• HUD-approved condominium project

• Manufactured home that meets FHA requirements

7. Can I still apply for a reverse mortgage if I have a mortgage on my home?

If you have a mortgage on your home, it is still possible to do a Reverse Mortgage. However, you must use your reverse mortgage funds to pay off the existing mortgages on the property.

8.Can I buy a new primary residence with a reverse mortgage?

If you are interested in using a reverse mortgage to purchase a new primary residence to live in, you can apply for the HECM for Purchase or Reverse Mortgage Purchase program. This will allow you the opportunity to purchase a new home and obtain a reverse mortgage loan in one transaction. A benefit of doing the purchase program is that you do not have to make monthly payments while living in your new home.

9. Will my Social Security or Medicare be affected?

Because a reverse mortgage is non-taxable and not considered income, borrowers do not have to worry about their Social Security or Medicare benefits being affected. However, be aware that if you have Medicaid or SSI, you need to check with a financial advisor to determine if your benefits may be affected.

10. What is the process for getting a reverse mortgage loan?

If you qualify and are interested in doing a reverse mortgage, here are the steps that you will encounter during the reverse mortgage process:

• Do your research:

  • One of the first steps that you must make when doing a reverse mortgage is to do your research. This means to research the lender that you will be working with and to research the program to ensure that this is the right choice for you.

• Attend Counseling Session:

  • As one of the requirements prior to your application, reverse mortgage borrowers must schedule and attend a reverse mortgage counseling session. This is to provide borrowers with impartial information about the loan, so that you have an unbiased understanding of how the reverse mortgage loan works.

• Complete Application:

  • The completion of the application would be done with the help of your lender/loan officer.

• Appraisal:

  • The lender will order an appraisal to be done on your home to determine your property’s market value. Once that information is received, the market value and the age of the youngest borrower (must be at least 62) are factors that are used to establish how much money the borrower will receive from the reverse mortgage loan.

• Disbursement of funds & Closing:

  • Once the loan has been approved, borrowers how they would like to receive their money. Borrowers are able to receive a limited lump sum, monthly payments, a line of credit, or any combination of the three. After the borrower has decided how they would like to receive their funds and the documents have been signed – the borrower has a 3 day rescission period, and after the rescission period has passed, the borrower will be able to receive their payments.

Are you or your family members interested in doing a reverse mortgage? Contact our Senior Advisor today at 1-888-808-8486 to learn more.