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Video: The How’s of a Reverse Mortgage

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The “How’s” of a Reverse Mortgage

Video Transcript:

“How’s of RM

Hi my name is Bill and today I’m going to answer some of your questions on reverse mortgages.

During this video, we’re going to be talking about how to qualify for a reverse mortgage, how  much you can receive from a reverse mortgage and how you can receive that money, the cost of a reverse mortgage and what happens to the home when the last borrower leaves.

The first question normally asked is, “How do you qualify for a reverse mortgage?”

Well, there are quick and long answers.  

We’ll do the quick answer:

  • Everybody on title must be 62 age or older.
  • Must be your primary residence.
  • House must meet minimum HUD requirements.
  • You have to undergo third party counseling from a government sponsored counselor. The counseling is there to ensure that the loan officer you speak to is not doing anything wrong and that you completely understand the reverse mortgage process.

The second question is asked is “How much can I receive from a reverse mortgage?”

The amount you receive is based on the age of the borrower, the older you are, the more you will receive. The value of your home, the more value, the more equity you can use out of your home. It is also based on the type of loan and interest rate you choose when you receive the reverse mortgage loan. There are different types of loans, but we can get into that at a different time, but the ones you need to know about are the adjustable and HECM fixed rate.  Depending on which you choose will determine how much money you receive.

The next question is, “How do I receive the money from a reverse mortgage loan?”

There are all kinds of different ways to receive your reverse mortgage funds:

  • One lump sum (Update: As of Sept. 30th, 2013 – HUD will be limiting the amount of funds received by the borrower in the first year.)
  • Receive monthly payments paid by the lender.
  • You could put money into credit line and use it when you need to.
  • You could get a combination of all 3 of these.

The good thing about this is that all the money you received from a reverse mortgage are tax free and can be used in any way that you choose.  You can pay off medical bills, home repair, go on a trip – your possibilities are endless.

The next question is, “How much does a Reverse Mortgage cost?”

The cost of a reverse mortgage varies from person to person. The fees you may have to pay include: HECM origination fee, federal mandated mortgage insurance, title insurance, escrow fees and anything that goes with a regular mortgage are included in your reverse mortgage loan. You also have the option to have the fees rolled into the loan or to pay it up-front.  

“How will I know when it is time to repay the loan?”

Well, it is going to be time to repay the loan when the last borrower passes away or moves away from the home. You may go into repayment status for any of the following: you stop paying your property taxes and insurance, which is also required for a regular mortgage.  Also, if you are not living in the home for a consecutive 12 months, the loan will also go into repayment.  The loan will also go into repayment status when the last borrower passes away.

“How will my family manage the repayment of a reverse mortgage loan?”

There is good news to this subject. A reverse mortgage is a non-recourse loan, meaning your family will never owe more than the fair market value of the house. However, your family needs to be aware of how to proceed when this happens. If your heirs have no interest in the home, then they can walk away from the loan and turn it back to the bank. No balance is due and your heirs and estate are free and clear.

Let’s go a little more in-depth for this subject:

If your heirs are interested in keeping the property, then they need to pay back the full value of the loan. As I had mentioned before, this is a non-recourse loan, which means, let’s pull some numbers out – let’s say your house is valued at $250,000 and the loan is $300,000. In order for the heirs to keep title and ownership of the home, they would have to pay back the entire $300,000. If they choose not to do that, they can sell the home at it’s value of $250,000. Or they can turn back the property to the bank as I said previously and there will be no tax implication on heirs or property.

“How do I know if a Reverse Mortgage is a good option?”

You could only do that through knowledge and education and realizing that a reverse mortgage loan is a tool for financial and retirement planning.

You could get knowledge and education through a reverse mortgage loan specialist or you can speak with a financial advisor or tax consult. Any of them could help provide information about reverse mortgage loans and how it can help you.

Thank you for listening to this. I hope you enjoy this and hope you received the education and information that you need.

Email us at reversemortgage@weblender.com or call us at 1-888-808-8486 to speak with an advisor.”


Image courtesy of [rattigon] / FreeDigitalPhotos.net

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