What Should You Know About Reverse Mortgages?

Here are answer to some common questions
seniors and their caregivers ask about Reverse Mortgages

What is a Reverse Mortgage?

A reverse mortgage is a loan that allows homeowners over the age of 62 to convert some of the equity in their home into cash or monthly income, without selling their home. Reverse mortgages work much like traditional mortgages, only rather than making a payment to the lender each month, the lender pays the borrower. Cash can also be received in a lump some of some other distribution arrangement, if desired.

Who Can Qualify for a Reverse Mortgage?

The borrower, and everyone on the property title, must be at least 62 years old. You must also occupy the home as your principal residence. If you don’t own your "free and clear," you mortgage balance must be low enough to allow additional distribution of equity. Income and medical fitness are not required to qualify.

How Much Money can I get with a Reverse Mortgage?

The amount of money available with a reverse mortgage depends on several factors, including your age, the value and location of the home, as well as and current interest rates.

How are the Funds from a Reverse Mortgage Disbursed?

There are several options for how the cash from your reverse mortgage can be disbursed. These include:

• all at once, in a lump sum;
• as a regular monthly payment to you;
• as a "credit line" so you can decide when and how much of your available cash is paid to you
• or a combination of these payment methods

How do people use the money from their Reverse Mortgages?

You can use the money for any purpose. Most people use the proceeds for home improvements, medical bills, in-home health care, to pay taxes and insurance, or to just to supplement Social Security or pension payments.

What are the Interest Rates for Reverse Mortgages?

Interest rates for reverse mortgages are calculated using a formula set by the federal government. The interest rate at the time of closing is the initial rate for the loan. Members have the option of choosing a monthly adjustable rate or an annually adjustable rate. All interest rates for reverse mortgages are adjustable.

How much does a Reverse Mortgage Cost?

The costs associated with taking out a reverse mortgage similar those for traditional mortgages. These generally include a loan origination fee, a property appraisal and credit report, and mortgage insurance premium and various other costs. Your reverse mortgage advisor will provide you with a personalized cost estimate showing a detailed breakdown of the costs you can expect for your own loan.

When do I pay back my Reverse Mortgage?

Reverse mortgages do not have to be paid back until the last surviving borrower dies, sells the home or moves out. The total amount owed at the end of the loan equals all of the cash advances you've received, plus the accrued interest.

Could I Lose my Home with a Reverse Mortgage?

No, you can never owe more than the value of your home at the time the loan is repaid. And you hold title to your home, so you do not give up home ownership. Since no payments are required, you do not risk defaulting on a Reverse Mortgage as you would with a traditional mortgage in which regular monthly payments are required.

Would The Lender Own My Home?

No, the reverse mortgage is a loan, and the borrower retains title to the property. At the end of the loan period (when the property is sold or the owner moves out), the loan is paid off. Because you retain title, you are still responsible for property taxes, insurance, utilities, home maintenance and other expenses related to home ownership.

Can A Reverse Mortgage Be Refinanced?

Yes, it can. Refinancing can make sense if your home increases in value or interest rates drop. The home can also be refinanced to pay off the reverse mortgage in the event your financial situation changes, or if you heirs chose to keep the property.

Could I Owe More Than My Home Is Worth?

No, you never owe more than the value of your home. In addition, since a reverse mortgage is a "non-recourse" loan, the lender cannot seek repayment from your income, your other assets, or your estate. In other words, the house stands for the debt.

What If I Outlive The Loan - Can The Lender Take My Home?

No, your home belongs to you, and you don’t need to repay the loan as long as you or another borrower continues to live in the house and keep the taxes paid and insurance in force.