1) Do I still own my home with a reverse mortgage?
Yes, you still hold title to your home.
The reverse mortgage is simply a mortgage against the title of the property. On title the reverse mortgage will be recorded as a lien. If a borrower was ever to payoff the reverse mortgage then a reconveyance would be recorded and the lien would be removed from title.
Homeowners will be required to keep current on all property charges when having a reverse mortgage. These can include property taxes, homeonwner’s insurance and HOA dues and fees 🙂
2) Do I qualify for a reverse mortgage?
At least one of the borrowers needs to be a minimum of 62 years old. The co-borrower can be younger.
Property types will determine if a reverse mortgage is eligible or not.
A reverse mortgage also requires some financial assessment to determine qualification. Financial Assessment involves reviewing both the borrowers credit and payment history along with annual income.
We encourage homeowners to use our ReverseAdvisors.org search to find a reverse mortgage advisor who can further assist with qualifying.
Find only the best reverse mortgage for you
3) What property types are eligible for a reverse mortgage?
Single-family residences, 2-4 unit properties, townhomes, manufactured homes and FHA approved condominiums.
The property must be a primary residence.
Please check with a reverse mortgage advisor for approval on manufactured homes and condominiums. They may require additional factors to determine approval.
Single Family Residence
These types of properties generally comply with reverse mortgage guidelines.
Special circumstances may present themselves on title or after the appraisal that must be addressed for the property to pass HUD/FHA guidelines. Please contact a reverse mortgage advisor with any questions
These types of properties generally appraise like single-family residences, because borrowers own the parcel that the townhome is located on.
Special circumstances may present themselves on title or after the appraisal that must be addressed for the property to pass HUD/FHA guidelines.
Must be FHA approved for a reverse mortgage to be eligible.
You can ask your homeowners association if your neighborhood is FHA approved or check by searching for your association on FHA Approved Condominiums.
Manufactured homes must be on permanent foundation and own the land they reside on. If the land is leased then other qualifying factors are present. HUD labels must be verified.
All of these types of properties can qualify for a reverse mortgage, but special circumstances may be present which can create problems. If you have any questions please do not hesitate to contact us, so we can discuss your property concerns further.
4) Can I have a trust and qualify for a reverse mortgage?
Both the title company and the lender will complete a trust review.
Once both sides approve the trust the loan will be allowed to close in the name of the trust.
Amendments may be requested at closing to correct a portion of the trust that does not allow for a reverse mortgage, or to add a portion that notifies the trust that there is a reverse mortgage loan against the subject property.
Revocable trusts are generally easier to get approved, because they allow for these amendments when needed.
5) Will my Social Security or Medicare be affected by a reverse mortgage?
In a lot of cases the future social security income assists in getting qualified to obtain a reverse mortgage.
However, SSI and Medicaid might be affected. Please check with your SSI and Medicaid representative before completing a reverse mortgage.
6) What is the loan term of a reverse mortgage?
The reverse mortgage has no definitive term.
You can continue to live in your home and continue the reverse mortgage for as long as you live in the home. You can also choose to sell your home at anytime and payoff the current reverse mortgage balance without a prepayment penalty. The option is yours.
However, please know that it is required that borrowers stay current on all property tax and property insurance payments as long as they live in the property.
7) How much money can I qualify to receive?
The main contributing factors are the youngest borrowers age and equity in the property.
An appraisal is completed during the loan process to set the maximum claim amount.
The age of the youngest borrower will be used to set the principal limit that each borrower can receive from their reverse mortgage.
The other contributing factors that can vary involve the reverse mortgage program and rate that you select.
8) How can I use the reverse mortgage proceeds?
How a borrower uses the HECM reverse mortgage loan proceeds is up to them.
Depending on the type of reverse mortgage program selected a borrower can receive their money as a lump sum, line of credit and/or a monthly payment.
Borrowers can use these proceeds to pay down other debt, purchase goods, or use to upgrade the subject property.
In addition a borrower can choose to use the available money any way they want or need. There are no penalties if a borrower keeps the money in a line of credit and decides not to use it.
9) Are reverse mortgage proceeds taxable?
No. Since reverse mortgage proceeds are not considered income they are not taxable.
In addition, it is always best to check with your tax professional to see if there may be any tax implications on how the reverse mortgage proceeds are used, or by no longer making a mortgage payment out-of-pocket.
10) Do I have to pay a monthly mortgage payment?
No. One of the main benefits of a reverse mortgage is not paying a monthly mortgage payment out-of-pocket.
Instead the monthly interest gets added to the loan balance every month.
Borrowers have the ability to make a payment out-of-pocket anytime they choose to either pay the interest amount, or principal amounts too. Before making payments out-of-pocket on the reverse mortgage loan you should consult with your loan professional and loan servicer to understand the implications.
Some reverse mortgage programs would not allow you to access the additional principal paid if you ever needed too.
11) How will the reverse mortgage affect the heirs?
The heirs will have the power to decide what they would like to do with the property. They can keep the property by paying off the current reverse mortgage using cash or qualifying to payoff using another mortgage refinance.
If they plan to keep the property then they can refinance the home at 95% of the appraised value, or whatever is owed on the loan, whichever is lower.
The heirs can also sell the property and keep whatever equity is left after the reverse mortgage is paid in full.
If in the event the reverse mortgage loan balance is higher than the current value the heirs will not need to pay the amount the property is short.
12) Do I need to continue to pay property taxes and property insurance?
Yes, the reverse mortgage loan agreement requires that all reverse mortgage borrowers remain current on all property charges through the duration of the loan.
These payments can be satisfied two ways that will be setup through the initial loan process.
The first way involves the responsibility of making all tax and insurance payments resting solely on the borrower.
The second way involves the creation of a loan set-aside that is referred to as a LESA, or Partial LESA. LESA, a common term in the reverse mortgage industry stands for Life Expectancy Set Aside. With a full LESA a portion of the available money in the reverse mortgage will be set-aside to make all future tax and insurance payments for the borrower, which will be initiated by the servicer.
A partial LESA will use a portion of the available money in a reverse mortgage to be set-aside and distribute payments to the borrower for the tax and insurance payments to be paid by the borrower.
13) What is reverse mortgage counseling?
Reverse mortgage counseling is a requirement when applying to obtain a reverse mortgage.
Each borrower will receive a list of 14 counseling agencies from their reverse mortgage advisor that are approved to conduct reverse mortgage counseling. Of the 14 agencies 9 of them are national counseling agencies and 5 of them are local to the state.
All of the counseling agencies conduct the counseling session over-the-phone or in-person with all borrowers present.
Each session can generally take from 60-90 minutes.
The counselor will talk about the reverse mortgage loan and review how to read the loan comparison, TALC and amortization schedules.
They will also ask you periodic questions to ensure that you understand the reverse mortgage and the information they are reviewing. Along the way, you are able to ask the counselors any questions that you may have.
Once the session is complete the counselor will issue a certificate stating that the borrowers completed the counseling session.
The counseling certificate is valid for 180 days.