 Answers to most of
your Frequently Asked Questions about Reverse Mortgages
Q. In what locations are you licensed?
A. I am licensed in all 50 states &
Washington, DC.
Q. How does a Reverse Mortgage differ from
a home equity loan?
A. While both Reverse Mortgages and
home equity loans enable you to turn the equity in your home into spendable
dollars, there are important differences between the two types of mortgages.
With a home equity loan, you must make regular monthly payments to repay the
loan. These payments begin as soon as the loan is originated. To
qualify for such a loan, you must earn a monthly income great enough to make
those payments. If you fail to make the monthly payments, the mortgage
lender can foreclose on you, and you can be forced to sell your home. In
addition, you may be required to re-qualify for a home equity loan each year.
If you do not re-qualify, the lender may require you to pay the loan in full
immediately. With a Reverse Mortgage, you do not repay the loan as long
as your home remains the principal residence, your income is not considered when
qualifying you for the loan, and there is no requirement that you re-qualify
each year.
Q. Who is eligible for a Reverse Mortgage?
A. You, and any co-borrowers, must be
at least 62 years old and either own your home free and clear or have a very low
outstanding mortgage balance that can be paid off at loan closing. Your
home most be a single-family or two- to four-unit dwelling. Units and
condominiums maybe eligible if they are in FHA-approved developments you also
must agree to accept mortgage counseling from a HUD-approved counseling agency.
Family members also are strongly encouraged to attend these counseling sessions.
Q. What are the minimum and maximum amounts
that I can borrow?
A. The maximum amount you can borrow is
based on a HUD formula that factors in the age of the youngest borrower, the
interest rate, and the maximum claim amount. The maximum claim amount is
the lesser of the appraised value of your house or the maximum principal amount
for a one family residence that can be insured by FHA in your area. The
maximum mortgage amount insured by FHA varies by geographic area and changes
frequently. Please check with your lender for the FHA maximum mortgage
amount for your area.
Q. What types of payment plans are
available with the Reverse Mortgage loan?
A. A borrower with a Reverse Mortgage
may choose among five payment options: Term, tenure, modified term,
modified tenure, and line of credit.
- Under the Term option,
you may receive equal monthly payments for a fixed period of time selected by
you.
- Under the Tenure option,
you may receive equal monthly payments for as long as you occupy the home as a
principal residence.
- Under the Line Of Credit
option, you may draw up to a maximum amount of cash at times and in the
amounts of your choosing, as long as you occupy the home as a principal
residence.
- Under the Modified Tenure
plan allows you to set aside a portion of loan proceeds as a line of
credit and receive the rest in the form of equal monthly payments as long as
you occupy your home as a principal residence.
- The Modified Term plan
allows you to set aside a portion of loan proceeds as a line of credit and
receive the balance as equal monthly payments for a fixed time period as
specified by you.
If you select either of the term plans, you
can remain in your home after the end of the loan term without starting
repayment. The same is true if you have withdrawn the maximum amount under
a line of credit or tenure payment plan. Remember, repayment of a
Reverse Mortgage does not begin until you no longer occupy your home as your
principal residence.
Q. How will the amount of the monthly
payment be calculated?
A. How much you can receive in monthly
payments is based on the age of the youngest borrower, the interest rate, the
maximum claim amount, and the length of time that you will be receiving
payments--for a fixed period or for as long as you live in the house. The
older you are the larger your payments are likely to be.
Q. Will Reverse Mortgage payments affect my
Social Security, Medicare, Supplement Security Income (SSI), or Medical
benefits?
A. Reverse Mortgage payments do not
affect your Social Security or Medicare benefits because those benefits are not
based on the assets of the recipient.
However, in the Federal Supplement Security
Income Program beneficiaries must keep their liquid resources under certain
limits. If you do not spend Reverse Mortgage advances in the month
received, then such funds are considered part of your liquid resources and may
adversely affect your eligibility for SSI. Therefore, a Reverse Mortgage
borrower who also receives SSI should never draw more money than actually
needed to spend that month.
Regulations for state-administrated programs
such as Medicaid, AFDC, Food Stamps, and for state-funded welfare programs (such
as state supplements to SSI) all have different eligibility requirements.
Therefore, we suggest that you consult a benefits specialist at your local Area
Agency on Aging or the local offices for these programs to determine how Reverse
Mortgage payments may affect your particular situation.
Q. Will I have to pay any fees to obtain a
Reverse Mortgage?
A. Yes, you will have to pay an
origination fee, other closing costs, and a mortgage insurance premium, which is
divided into two parts: an upfront premium of 2% of the maximum claim amount,
and an annual ongoing fee of 0.5% on your mortgage balance. You may be
able to finance the organization fee, other closing costs, and the upfront 2%
mortgage insurance premium, meaning, these items may be included in your loan
balance so you do not have to pay for them in cash. In addition to the
yearly insurance premium, a servicing fee is charged to your loan balance each
month.
Q. Can I be forced to sell or vacate my
home if the money I owe on the loan exceeds the value of my home?
A. Absolutely not, as long as you
continue to occupy the property as a principal residence. You cannot be
forced to sell or vacate the property, even if the total of the mortgage
payments to you plus interest and mortgage insurance premiums exceeds the value
of the property or if the fixed term over which you received your payments has
expired. No deficiency judgment may result from your Reverse Mortgage
loan. FHA insurance covers any further financial obligation to the lender.
Q. Will my Heirs owe anything to the
mortgage lender if I die?
A. Upon your death, the loan balance,
consisting of payments made to you on your behalf plus accrued interest, becomes
due and payable. Your heirs may repay the loan by selling the home or by
paying off the Reverse Mortgage loan so that they may keep the home. If
the loan exceeds the value of your property, your heirs will owe no more then
the value of the property. FHA insurance will cover any balance due to the
lender. No additional financial claims may be made against your heirs
or estate.
Q. If my home appreciates in value during
the mortgage term, who will be entitled to that money?
A. Under a Reverse Mortgage you are
legally required to pay back to the lender only the outstanding balance.
Any money remaining after the mortgage is paid goes to you or, upon your death,
to your heirs.
Q. What if I decide to sell my home?
A. If you choose to sell your home, the
outstanding loan balance becomes due and payable to the mortgage lender.
You or your estate will receive any proceeds exceeding the loan balance.
Q. Can I sell my home to my children and
continue to live in it?
A. If you sell your home to your
children or any other individual, the HECM will be due and payable at
settlement. After the loan is repaid, any arrangements for your continued
occupancy of the property must be made with the new owners.
Q. What is Fannie Mae's role in the Reverse
Mortgage program?
A. Fannie Mae has agreed to purchase
two types of adjustable-rate HECM loans from the lenders who originated them.
One adjustable-rate mortgage (ARM) plan features annual interest rate
adjustments with a 2% cap on the amount that the interest may change at each
adjustment and a 5% cap on increases or decreases over the life of the loan.
The other ARM plan features monthly interest rate changes and limits interest
rate increase to a 10% over the life of the loan.
Still have Questions? Call me!
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