Common Questions About Reverse Mortgages
Why should I get a Reverse Mortgage instead of refinancing or getting a home equity loan?
Are Reverse Mortgages a safe product?
Will a Reverse Mortgage affect my children or other heirs?
What is the Reverse Mortgage process and what are the costs?
What are the interest rates and how are they calculated?
How do you calculate the amount I can receive from my Reverse Mortgage?
What are the options for receiving the cash from my Reverse Mortgage?
What can I use the money I receive from my reverse mortgage for?
Is the money I receive from a Reverse Mortgage taxable or does it effect social security or other subsidized programs?
Will the lender ever take my home?
Why should I get a Reverse Mortgage instead of refinancing or getting a home equity loan?
With a Reverse Mortgage, not only do you not have to make any monthly mortgage payments, you also do not have to worry about credit or income qualifications. Even if you are behind on your mortgage or going into foreclosure, you can obtain a Reverse Mortgage and guarantee that you will never lose your home.
>>Top
Are Reverse Mortgages a safe product?
A Reverse Mortgage is one of the safest loans you may possibly have. 95% of all Reverse Mortgages fall into the category of HECM’s (Home Equity Conversion Mortgage) which are insured by the HUD through the US Government. HUD has certain guidelines and protections that regulate fees, expenses and the interest rate you can be charged. You also must attend a counseling session by an approved HUD counselor to give you independent information. Other types of Reverse Mortgages also have similar protections built in.
>>Top
Will a Reverse Mortgage affect my children or other heirs?
While you are going to be spending a portion of your children’s inheritance with a Reverse Mortgage, you also do not wish to become a burden to your children and they, in return, want you to be able to enjoy your retirement years with financial security. If the children want to keep the house, they can refinance with a traditional mortgage and repay the Reverse Mortgage. Otherwise, they will sell the house to repay it and keep any remaining proceeds.
>>Top
What is the Reverse Mortgage process and what are the costs?
Like any other financial transaction, getting a reverse mortgage involves a number of steps designed to protect both you and the lender. Here are the steps you can expect to go through when you apply for your reverse mortgage with Melinda Hipp and Legacy Mutual Mortgage :
- Initial Discussion
The first thing we like to do is talk to you, either over the phone or in person, about whether a reverse mortgage is right for you. We talk about the pros and cons, how it works, how much money you might receive and anything else you’d like to know about. Then you decide whether you want to take the next step and I provide you with an estimate of funds available.
- Counseling
If you decide that a reverse mortgage is the right choice, you receive free independent counseling from a certified, HUD-approved counselor to make sure that you have had all your questions answered and that there's been no confusion. A list of available counselors is available from me for your use. It’s a protection device that the government has built into the process of obtaining a reverse mortgage.
- Appraisal
Then we arrange for an appraisal to determine the objective market value of your home, and whether any repairs will be required to meet Federal Housing Administration guidelines. In some cases an inspection is required to make sure that the home is structurally sound and that there’s no extensive termite or dry rot damage. Sometimes repairs may be required and the costs can be rolled into your reverse mortgage.
- Underwriting
After the appraisal and inspection reports come in we go through all the normal processing procedures that you might find in any mortgage.
- Closing
The final step is the closing with a notary and after a three day waiting period you will receive the money, or proceeds, from your reverse mortgage. You can choose to receive the payment in one of three ways: as a lump sum, as a monthly payment or as a line of credit. Then it's up to you: pay bills, fix up the house, help a family member, or use the money to enjoy your life.
Just like a traditional mortgage, there will be costs associated with obtaining the loan. These may include: an origination fee, appraisal fee, title and recording fees, survey if necessary, attorney’s fees, mortgage insurance costs and servicing fees. However, all these costs can be financed into the Reverse Mortgage and not paid out-of pocket. You will be provided an estimate of these costs.
>>Top
What are the interest rates and how are they calculated?
All Reverse Mortgages are adjustable rate mortgages (since there is no set term you are keeping the mortgage) and the rates can fluctuate up and down. The starting rates are LOWER than current conventional mortgage rates. There are various rate plan that we will discuss with you and help you select the best plan for your situation. The most popular is the monthly adjustable rate that is tied to the one-year US Treasury Index. It is a very stable index and can be observed in the financial news each day. A margin of 1.5% is added to this index each month to calculate that month’s rate. All rates have caps that keep the rate from adjusting too high even though historically, the rate has never come close to the max allowed.
>>Top
How do you calculate the amount I can receive from my Reverse Mortgage?
There are several factors that determine the amount you can receive from your Reverse Mortgage. The primary factors are: your age, the age of your spouse, the market value of your home, the current amount owed on the home and the specific Reverse Mortgage program you select. A real estate appraiser will determine the market value based on the sales in your neighborhood among other things. Generally, the older you are, the more of your equity you can access.
If one of the homeowners is significantly younger or under 62, that spouse may be removed from the title; however, if the spouse with the Reverse Mortgage passes away or permanently moves to a nursing home, the loan will be due and payable. Typically, the remaining spouse does not want to remain in the home anyway or the spouse may choose to pay the loan with life insurance from the estate of the deceased spouse.
>>Top
What are the options for receiving the cash from my Reverse Mortgage?
There are three basic options for receiving your cash, or you can do a combination:
- A one time lump sum payment after all mortgages or other liens are paid off.
- Monthly payments based upon a preset amount of time (after which the payments stop) or a lifetime guaranteed payment similar to an annuity.
- Now available, in Texas , you can also set up a line-of-credit that you may draw from whenever you wish. The balance in the line-of-credit increases each month to take advantage of your home’s appreciation and your increasing age. The funds from your line-of-credit are not added to your loan balance until you withdraw them.
>>Top
What can I use the money I receive from my reverse mortgage for?
Anything! There are absolutely NO restrictions on what the money can be used for. Pay off debt, fix up the house, buy a new car or vacation home, go on an extended trip or simply put the money aside to pay for future healthcare needs, long-term care insurance or other needs. It’s your decision.
>>Top
Is the money I receive from a Reverse Mortgage taxable or does it effect social security or other subsidized programs?
There are no income taxes on any Reverse Mortgage income as you have already paid taxes on this money in your earlier years. In addition, the Reverse Mortgage income does not affect any regular Social Security or Medicare programs. If you participate in any NEEDS based program such as SSI or Medicaid, you will have to consult with your particular benefits counselor for information on how a Reverse may affect these benefits.
>>Top
Will the lender ever take my home?
Just like a traditional mortgage, you retain the title to your home. The lender has no right to any part of your home or its future increases in equity above the payoff of the mortgage. And again, even if you owe more than the home is worth in the end, you or your heirs will NEVER have to reach into your pockets to pay back more than the home can be sold for.
>>Top
|
