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Reverse Mortgage FAQ | ||
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The reverse mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. However, there are many misconceptions and I hope this site will help you better understand the reserve mortgage. The source of the following is The National Reverse Mortgage Lenders Association (NRMLA). 1. Am I eligible for a reverse mortgage? 3. What are my payment options? 4. How much does a reverse mortgage cost? 5. Do I need to get an appraisal of my home to get a reverse mortgage? 6. Do I need a lawyer to apply for a reverse mortgage? 7. Am I required to receive counseling before I get a reverse mortgage? 8. Is the money from a reverse mortgage taxable income? 10. Are there any limits on how I can use the funds from a reverse mortgage? 11. What is the interest rate on a reverse mortgage and how is it determined? 12. Who owns title to my home while my reverse mortgage is outstanding? 13. Am I required to pay anything during the course of the reverse mortgage loan? 14. How much will be owed when my reverse mortgage comes due? 15. What happens if I move out of my house after I get a reverse mortgage? 16. What happens when my house gets passed to my heirs? <Answers> 1. Am I eligible for a reverse mortgage?
This depends on a few factors, including your age at the time of loan closing, the value of your home, the amount of built-up home equity, and interest rates at the time of origination. Other factors are the type of reverse mortgage product and particular payment option you select. Calculators that can help you estimate how much you could receive under different products and payment options are available at www.ReverseMortgage.org, and from reverse mortgage lenders and counselors. 3. What are my payment options? You decide how to receive the money generated by a reverse mortgage. In general, your payment options are:
4. How much does a reverse mortgage cost? Many of the same costs of home purchase mortgages apply to reverse mortgages. You can expect to be charged an origination fee, an upfront mortgage insurance fee, an appraisal fee, and certain other standard closing costs. In most cases these fees and costs are capped and may be financed as part of the reverse mortgage. 5. Do I need to get an appraisal of my home to get a reverse mortgage? Yes. Since the value of your home is a factor in determining how much money you can get from a reverse mortgage, an appraisal is required. 6. Do I need a lawyer to apply for a reverse mortgage? Legal counsel is not required. However, NRMLA encourages you to seek the advice of a legal, tax, or financial advisor before committing to a reverse mortgage. 7. Am I required to receive counseling before I get a reverse mortgage? Yes. Counseling, one of the safeguards of reverse mortgages, is required before you can obtain a loan. Counseling is an educational session at which you are informed about reverse mortgages and your other options. You can get the name of a local counseling agency or qualified telephone counselor from a reverse mortgage lender or by calling AARP (1-800-424-3410), or HUD's Housing Counseling Clearinghouse (1-888-466-3487). 8. Is the money from a reverse mortgage taxable income? Funds from a reverse mortgage are tax-free; it's your money, not additional income. 9. Will the money from a reverse mortgage affect my Social Security benefits or other government benefits? A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you receive a lump sum payment from a reverse mortgage, any amount retained the month after you get it would count as a resource and could affect Medicaid eligility. To assess the impact, if any, on other federal or state assistance or medical programs, you may wish to consult with your local Area Agency on Aging (to locate, call 1-800-677-1116, or visit http://eldercare.gov), a reverse mortgage lender, or a tax attorney. 10. Are there any limits on how I can use the funds from a reverse mortgage? No. Borrowers have spent the funds from reverse mortgages for a variety of purposes. Among these have been to pay health care expenses, supplemental retirement income, home improvements, home modifications, higher education, gifts to others, and long term care insurance premiums. Some have used a reverse mortgage to purchase recreational vehicles, start a small business, and travel the Amazon. Some have used reverse mortgages to eliminate expenses by paying off mortgages and credit card debt. The only limit on how you use a reverse mortgage is your imagination. 11. What is the interest rate on a reverse mortgage and how is it determined? The interest rate varies by type of reverse mortgage.
Please refer to the page about Reverse Mortgage Programs & Interest rates. 12. Who owns title to my home while my reverse mortgage is outstanding? You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage. 13. Am I required to pay anything during the course of the reverse mortgage loan? No. The flow of payments is reversed during the term of the reverse mortgage - the lending institution pays you. However, you are responsible for keeping up payments for your homeowner's insurance and property taxes, and to maintain the condition of your home. 14. How much will be owed when my reverse mortgage comes due? The amount that is owed to the lender typically includes the amount borrowed to date, the amount of accrued interest, accrued mortgage insurance premiums (for the HECM), servicing fees, and any other costs and fees financed as part of the loan amount. In no event will the repayment amount exceed the value of the home at the time that the loan comes due. There are no prepayment penalties for the current reverse mortgage products. 15. What happens if I move out of my house after I get a reverse mortgage? Once you no longer occupy your home as your principal residence for more than one year, the reverse mortgage comes due and must be repaid. Similarly, if you sell your house, the reverse mortgage comes due. 16. What happens when my house gets passed to my heirs? Once your home is passed to your heirs, the reverse mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sales proceeds. Contact Tracy Taguchiｓfor a free consultation and a quote. | ||
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