Reverse Mortgage

Fast Facts

What is a Reverse Mortgage?

A reverse mortgage is a program that allows senior homeowners (62+) to transform some of the equity in their homes into tax-free income without having to sell the home, give up title, or make monthly mortgage payments.

The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you in one lump sum, in monthly payments or in credit line requests when you want the money.

Eligible property types include single-family homes, manufactured homes built after June 1976, qualified condominiums, and townhouses.

Enhancing your retirement years

The funds from a reverse mortgage can be used for anything: daily living expenses; home repairs or modifications; health care expenses, including prescription drugs or in-home care; pay-off of existing debts; lifestyle enhancement; prevention of foreclosure; and other needs.

There are no income or medical requirements to qualify. You may be eligible for a reverse mortgage even if you still owe money on a first or second mortgage. These mortgages can be paid off and with a reverse mortgage no monthly payments are required.

What are my payment options?

You can choose how to receive the money from a reverse mortgage. The options are: all at once (lump sum); fixed monthly payments (for up to life); a line of credit; or a combination of these. The most popular option – chosen by more than 60 percent of borrowers – is the line of credit, which allows you to draw on the loan proceeds at any time.

The amount of money you get from a reverse mortgage depends on several factors, including: your age, type of reverse mortgage selected, appraised home value, current interest rates, and – sometimes – where you live. In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you get.

The funds from a reverse mortgage are tax-free; it's your money, not additional income. A reverse mortgage does not affect regular Social Security or Medicare benefits.

Mandatory Counseling

Before applying for a reverse mortgage, you must first meet with a counselor. A list of approved counseling agencies can be found at http://www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm .This is a nationwide list posted online by the U.S. Department of Housing and Urban Development. Or, you can schedule a counseling session with an AARP-approved telephone counselor, 1-800-209-8085 http://www.hecmresources.org/states/reque_state_index.cfm.

The counselor’s job is to educate you about reverse mortgages, to inform you of other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product best fits your needs.

Paying Back Your Loan

No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out.

The amount owed can never exceed the value of your home. Furthermore, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.

Requirements for Obtaining a Reverse Mortgage:

• Both spouses must be at least 62 years of age or older
• The home must be your primary residence
• The home either needs to be paid in full, or have a mortgage balance that can be paid off with the proceeds of the Reverse  Mortgage
• Unlike traditional mortgages, the approval process requires no income on your part and does not consider your credit rating. You  can be in foreclosure for example and we can still proceed with a reverse mortgage.

Program Benefits:

• There are NO payments on the mortgage as long as you live in your home
• The proceeds can be used for any reason that you desire
• You retain ownership to your home, not the Lender
• The proceeds from a Reverse Mortgage are not taxable
• The FHA Reverse Mortgage is a Federally insured program
• After your estate repays the lender, the remaining equity is paid to your heirs
• There are a number of flexible payment options available to you.

The Amount That You Can Receive Depends on 3 Factors:

• The interest rate at the time of closing.
• The age of the youngest borrower (The older the borrower age,  the greater the proceeds available)
• The appraised value of the home (The higher the appraised value, the greater the proceeds to you)

The Loan is Repaid When:

• The last borrower passes away
• The home is no longer the borrowers primary residence
• The home is sold
• The borrowers transfer title of the property to someone else

Repayment Options:

• Proceeds from the sale of the home: The remaining equity will be       distributed to your heirs or your estate
• Refinance the Home: If your family or estate wish to keep the home, a conventional mortgage can be used for repayment and any additional equity remains in the control of your family members or the estate
• Life Insurance Proceeds

Basics of Reverse Mortgages

76,802 American seniors received an FHA/HUD reverse mortgage in 2006. They decided it was the best way to increase their peace of mind and enjoy better quality of life without selling their homes. Even so, you should carefully study this site and use the online tools to learn if a reverse

mortgage is right for you.

Benefits

You retrieve the equity you have in your home as a lump sum of cash, monthly payments, or a line of credit. You never need to repay the reverse mortgage as long as you live in the home. Your existing mortgage (if you have one) will be fully paid off. The disbursements are tax-free

and can be spent however you like with no impact on Social Security or Medicare benefits.

Eligibility

In order to qualify, all homeowners must be age 62 or older. Furthermore, we recommend that you have paid off 40% or more of your mortgage. Finally, you should be planning to stay in your home for at least several years. There are no income or credit requirements.

Cost

The cost of an FHA HUD reverse mortgage (HECM) is considerably lower than buying and moving to a new home. Interest rates are usually lower than the best rates on a traditional mortgage. All costs are packaged into the reverse mortgage so you never have out-of-pocket expenses.

Liability of estate

Your heirs are never personally liable for the reverse mortgage since it is secured solely by the equity in your home. Your heirs inherit the property and have the option to sell it or refinance with a traditional mortgage.

Repayment

You owe nothing as long as one homeowner lives in your home. Also, the FHA mortgage insurance ensures that you can never owe more than the sale-price of your home, even if the home depreciates.

When you move out of the home, your estate has up to 12 months to repay the loan (usually by selling). If the home sells for more than the loan balance, the remaining equity passes to your heirs.

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