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Frequently Asked Questions about Reverse Mortgage
What is a Reverse Mortgage?
A reverse mortgage enables homeowners 62 years and older to convert the equity in their homes into monthly income and/or a line of credit to be repaid when they no longer occupy the home. 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. You never make another mortgage payment.
Will I Still Own Title to My Home While My Reverse Mortgage is Outstanding?
Yes, you retain title to your home during the period when you have a reverse mortgage, just the same as with a regular forward mortgage.
Are There Any Special Requirements to Get a Reverse Mortgage?
As long as you own your home, are at least 62 and have enough equity in your home, you may qualify for a reverse mortgage. There are no credit qualifications, income or medical requirements.
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
- Line of credit, which is the most common, allows you to draw on proceeds at any time
- Combination of the above
How Much Money Will I Receive?
The amount of funds you are eligible to receive will depend on your age, appraised home value and current interest rates.
Does My Home Qualify?
Your home must be your principal residence. Eligible property types include single-family homes, 1-4 unit properties, some manufactured homes, condominiums and townhouses.
How Can I Use the Proceeds for a Reverse Mortgage?
The proceeds from a reverse mortgage can be used for anything, whether it is to supplement retirement income, repair or modify a home, pay for health care, retire existing debt, buy a new car, take a “dream” vacation, cover property taxes, prevent foreclosure or have cash available for an emergency. It is completely up to you how you choose to utilize your proceeds.
What If I Have an Existing Mortgage?
With enough equity in your home, you will be able to pay off your existing mortgage or other debt with a reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. Many borrowers then realize they have additional money left over from their reverse mortgage to use for any purpose.
Will a Reverse Mortgage Affect My Government Assistance?
A reverse mortgage generally 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. 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 a local HUD approved counselor or an independent third-party to make sure you understand the program and review alternative options before you apply for a reverse mortgage.
Am I Required to Pay Anything During the Course of the Reverse Mortgage Loan?
No. The flow of payments is reversed during the term of the reverse mortgage – the lender pays you. However, you are responsible for keeping up payments on your homeowner’s insurance, property taxes and to maintain your home in good repair.
When Do I Pay Back My Loan?
No monthly mortgage 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.
How Much Will be Owed When My Reverse Mortgage Comes Due?
The amount owed to the lender typically includes the amount borrowed to day, the amount of accrued interest, accrued mortgage insurance premiums (for HECM), servicing fees and any other cost and fees financed as part of the loan amount. In no event will the repayment amount exceed the value of the home at the time the loan comes due. 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.
To talk with one of our Reverse Mortgage Specialists,
please call (678) 957-4065.
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