Frequently Asked Questions About Reverse
Mortgages
What is a reverse mortgage?
Simply, a reverse mortgage is when the loan
payments are reversed. A lender makes payments
to you. You receive the payments, by converting
your property's equity into cash. Mortgage
balance grows rather than getting smaller over
time.
How do I qualify for a reverse mortgage?
There are no credit or income requirements. You
may be eligible for a reverse mortgage even if
you still owe money on a first or second
mortgage. In fact, many people get a reverse
mortgage just to pay off a mortgage or line of
credit. But, you and anyone else on the title,
must be at least 62 years old. Talk to us if
someone under 62 is on the title.
How much money can I get from a reverse
mortgage?
The amount you can receive is based upon your
appraised property value, lending limits, and
your age. You can do anything you want with the
money. Use our reverse mortgage Cash Calculator
to see an estimate of how much you can get.
Does the bank take my house when I get a
reverse mortgage?
Our favorite question. No. You continue to own
your home. The lender does not own your home.
While the reverse mortgage is outstanding, you
continue to own your home. You hold title to it.
Can I lose my home with a reverse
mortgage?
No. This is another common misconception.
Your home cannot be taken from you as long as
you:
- Live in the home as your primary
residence.
- Make necessary home repairs.
- Pay your property taxes.
What's more, a reverse mortgage is a
non-recourse loan. This means that the lender
can only get repayment of the loan from the
proceeds of the sale of the property. Your heirs
will not be responsible for the repayment of the
loan. Simply, you can never owe more than the
value of the home regardless of the loan
balance. So, if you live longer, you win. The
same rule applies if a catastrophe struck and
the value of the home is reduced.
What are the benefits of a reverse
mortgage?
One main benefit is staying in your own home and
not moving. Plus, unlike a home equity line or a
refinanced mortgage, you don't need income or a
certain credit score to qualify, and you don't
repay the loan until you leave your property.
Unless you want to.
Are there different kinds of reverse
mortgages?
Yes, and not all reverse mortgages are created
equal. Call us and we will take the time to
answer all your questions about any reverse
mortgage such as, if they fit your needs and how
different reverse mortgages compare.
What does a reverse mortgage cost? Aren't
reverse mortgages expensive?
The types of fees and costs of a reverse
mortgage are very similar to those of your
forward mortgage, or the mortgage that you used
to buy your home originally such as origination,
appraisal and other charges. They can be
financed as part of your reverse mortgage.
You will notice that reverse mortgages can be
more expensive than the forward loan that you
got when you first bought your property. That's
to compensate the lender for the loan not being
immediately repaid, while you are in the house.
When do I need to pay back a reverse
mortgage?
No payments are due on a reverse mortgage while
it is outstanding. The loan becomes due and
payable when you cease to occupy your home as a
principal residence, fail to make necessary home
repairs, or do not pay your property taxes. This
can occur if you (the last remaining spouse, in
cases of couples) pass away, sell the home, or
permanently move out. So, you can pay it back at
anytime, but not until you move out, sell the
house, or the last applicant passes away.
What happens when I pass my home to my
heirs?
Your heirs will only have to decide to refinance
the debt if they wish to keep the home or sell
in order to pay the balance. Actually, a reverse
mortgage allows a 'reasonable time' (usually at
least 6 months) for your heirs to settle the
estate and decide what to do. This is a greater
amount of time than traditional mortgages
provide and there is no period of default during
this time.
Does a home in a living trust qualify for
a reverse mortgage?
Yes. In most cases. Just provide, or we'll help
you get, a copy of the trust, or the certificate
of trust.
Is there any tax liability for the
proceeds from a reverse mortgage?
No. Money received from a reverse mortgage is
generally categorized as loan advances and not
taxable income. Also, interest expense from the
reverse may be tax deductible. You'll want to
ask your tax advisor.
How does a reverse mortgage affect Social
Security, Medicare or pension benefits?
Reverse mortgages generally do not affect these
benefits, however programs do vary state by
state so you should consult your financial
advisor or local senior agency for more
information. Look in our local resources links.
Will a reverse mortgage affect the future
sale of my property?
No, a reverse mortgage will not affect the
future sale of your property.
What kinds of properties qualify for a
reverse mortgage?
Many types of properties do qualify for a
reverse mortgage, such as manufactured homes
built after June 15, 1976 and multi-unit condos.
Call us at 1-866-571-FMMC (3662).
Can I use a reverse mortgage to buy a
home?
Update: Yes, beginning on January 1, 2009. For
more information, see our Reverse Mortgage for
Purchase page and our Downsizing Calculator.
Can I refinance a reverse mortgage?
Yes! You can.
Is it required that I receive counseling
before getting a reverse mortgage?
Yes. Counseling from a HUD-approved counseling
agency is a requirement. It is designed to
protect you and make sure that a reverse
mortgage is right for you and your family. We
feel its so important that we'll brief you both
before and after your counseling session so you
get the most from it.
Why is a Mortgage Insurance Premium
collected?
A premium is collected to protect you, so that
you will not owe more money than the current
market value of your house (ie. if your home
depreciates) and so that you will continue to
receive your reverse mortgage funds even if the
lender can no longer make payments to you.
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