Reverse Mortgages are a blessing!

Reverse Mortgages Explained

Reverse Mortgages Explained

American homeowners age 62 years and older(some 55 YO’s too) are able to convert the equity in their homes through the use of a reverse mortgage. The most popular loan is the FHA Home Equity Conversion Mortgage.  As a senior friendly product, these loans require ; limitated credit or income verification and eligibility is based on age, primary residency, and existing mortgage balance. 

The loan process is simple and fast and unlike conventional loans there are no required monthly payments.  Another feature of these loans is that they are “non-recourse” loans, which means that no matter how high the loan balance grows, the borrower or their heirs never owe more than the home’s market value.

The loan is a first lien mortgage that requires repayment when one of the following three maturity events takes place.

• Sale of the property
• Permanent move out of the property by the borrower (the second to move out in the case of a couple)
• Death of the borrower (the second to pass away in the case of a couple)

The greatest benefit of the reverse mortgage is that this loan allows seniors to stay in their homes and utilize their home equity for medical, insurance, home repair or monthly income needs.  The proceeds may be used for any legal purpose and since they are receiving equity, it is on a tax-free basis since reverse mortgage proceeds are a form of property equity.  

Senior homeowners have several options for the equity release of their reverse mortgage. Proceeds can generally be paid out in a lump sum, a line of credit, and or monthly payments for as long as they live in the home, or a combination of these options.  ( Not all programs or options are available in all states.)

All of the reverse mortgage products require independent counseling to assure a complete understanding of the loan by the borrower.  The counseling is provided at no cost to the borrower.  Upon completion of this counseling requirement, the borrower can proceed with the reverse mortgage if they wish.  Typically, the entire loan process takes about 6 to 7 weeks to complete.

The loan costs vary by program but include typical mortgage closing costs.  As this is a senior friendly loan, all of the closing costs can be financed through the loan so there is no out of pocket expense for the borrower.

There must be at least one borrower 62 years old and you must own your own home or condominium in order to qualify for a reverse mortgage.  There are limited income or credit requirements to qualify.  Based on the amount of benefit, which you qualify for, you may be eligible for a reverse mortgage even if you still owe money on your first mortgage.
 
The proceeds from a reverse mortgage can be used for anything: daily living expenses; home repairs and home improvements; medical bills and prescription drugs; pay-off of existing debts; education; travel; long-term health care; retirement and estate tax planning; and other needs you may have. 

The amount of benefit that you will qualify for, will depend on your age at the time you apply for the loan, the type of reverse mortgage you choose, the value of your home, current interest rates, and for some products, where you live.  As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be. 

The loan costs vary by program but include costs similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs.  With a reverse mortgage, all of these costs can be financed as part of the mortgage. 

After you talk with us, you are required to meet with an independent reverse mortgage counselor before applying for a reverse mortgage.  The counselor’s job is to educate you about reverse mortgages, to inform you about other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product would best fit your needs if you elect to get a reverse mortgage.  This counseling session can be done in person or over the telephone.