Frequently Asked Questions (FAQs)

What is a Reverse Mortgage?

A reverse mortgage is a loan that offers qualified homeowners (age 62+) the ability to leverage the equity of their home to borrow money without having to make monthly payments.

Virtually all reverse mortgages are insured by the Federal Housing Authority (FHA).

Insured reverse mortgages are also known as a Home Equity Conversion Mortgage (HECM).

How do reverse mortgages work?

Unlike standard home loans where you make payments to the lender, you receive money from the lender; the money can be provided to you in one lump sum, on a scheduled basis or as a line of credit that you can use as you need.

Repayment of the loan becomes due when you or the last borrower:

  • Dies
  • Sells the house or moves to a new residence
  • Does not live in the house for 12 consecutive months

At that time, the heirs to the home either repay the balance of the reverse mortgage or sell the home to pay off the balance. Any remaining equity in the home remains with the heirs.

(Note: The heirs are not personally liable if the home sells for less than the balance of the reverse mortgage.)

Who can quality for a reverse mortgage?

To qualify for a reverse mortgage:

  1. You must be least 62 years old and be listed as a homeowner on the title.
  2. Your home must be your primary residence.
  3. You must have equity in your home.
  4. You must meet the financial assessment guidelines.
  5. Your home must meet Federal Housing Administration (FHA) standards.

Reverse mortgages also require that you pay your property taxes, insurance and maintain your home.

Upon qualification and approval, you can enjoy the many benefits that come with a reverse mortgage.  As long as you follow the terms of the loan, you may live in your home for as long as you wish.

What’s the difference between a reverse mortgage and home equity line of credit?

The main difference is that you will have no monthly payments with a reverse mortgage and the owner of the home is not liable to the lender for any amount over the loan balance if the loan balance exceeds the value of the home at the time of repayment.

Must my house be paid off for me to qualify for a reverse mortgage?

No. You do not need to pay off your home to qualify. However, the loan proceeds you receive from a reverse mortgage must be used to pay off the existing mortgage or liens (if there is a mortgage balance owing). You will continue to hold title to your home.

How much money can I get?

It depends.  As Carol works together with you to go through the process of finding out if a reverse mortgage can work for you, there will be some personal questions that you should be prepared to answer. 

When you ask “How much money can I get?”, you will evaluate the following with Carol: 

  • Your age
  • Value of your home
  • Type of reverse mortgage
  • Financial assessment
  • Current interest rates
  • Existing mortgage balance
  • FHA lending limits for your area

All of the above will affect the amount of money that you may be able to receive and how it may be distributed to you over time.

How do I receive my money? 

You can choose to receive money in a lump sum, monthly payments or a line of credit which can be accessed as often as needed for your future needs.  Many people choose a combination of these options.  It is important to understand the different options available and find the right solution that meets your particular needs.

When do I have to pay my lender back?

Repayment of the loan becomes due when you or the last borrower:

  • Dies
  • Sells the house or moves to a new residence
  • Does not live in the house for 12 consecutive months

At that time, the heirs to the home either repay the balance of the reverse mortgage or sell the home to pay off the balance. Any remaining equity in the home remains with the heirs.

(Note: The heirs are not personally liable if the home sells for less than the balance of the reverse mortgage.)

Is it required that I receive counseling before getting a reverse mortgage?

For your own protection, anyone who chooses to file for a reverse mortgage loan is required by law to obtain counseling from a Department of Housing and Urban Development (HUD) approved third party counselor.

Can the lender take my home away if I outlive the life of the loan?

No. As long as at least one of the borrowers resides in the property, keeps property taxes and insurance current and keeps the home in good repair, there is no need to repay a reverse mortgage.

Will I still have an estate that I can leave to my heirs?

When the home is sold, either you or your estate will repay the reverse mortgage balance to the lender. The total due will include any amounts that were disbursed to the homeowner, as well as any interest that has accrued. Any surplus will be disbursed to either yourself or to your heirs.

What happens to my existing mortgage?

When pursuing a reverse mortgage, any existing mortgages will need to be satisfied so that the new mortgage is the only lien attached to the property. If there is not enough equity in the home to pay off the existing mortgage, you will be required to use your personal liquid assets to satisfy the difference.

Can I get a reverse mortgage on a second home, investment or resort property?

No; only a primary residence is eligible for a reverse mortgage.

What types of homes are eligible for the reverse mortgage program?

To be eligible for a reverse mortgage, the subject property must be a 1- 4 unit home or condominium and must meet FHA requirements.

Can I ever refinance after obtaining reverse mortgage?

Yes. There may be a time when your financial needs change in such a way that you decide to make changes to your home financing. A reverse mortgage can be refinanced into a new reverse mortgage or into a traditional mortgage, provided you qualify for the new mortgage.

My home is in a living trust; do I qualify for a Reverse Mortgage?

Most homes placed in a living trust can still be financed with a reverse mortgage. Consult with your trust account manager to ensure that your contract does not prevent this type of financing prior to beginning your application.

 

Personal Attention for Your Very Personal Decision

Call Carol now and she will offer all the time you need, at no charge, to make the right decision for yourself or your family.

(650) 453-3244