Reverse Mortgage Facts
Reverse Mortgage Definition: A reverse equity mortgage is a unique type of home loan that enables homeowners 62 and older to use their home’s equity to receive a monthly income, a lump sum of cash, or a line of credit. Or you can receive a combination of these options. There is no income qualifying and credit requirements are very lenient. So this is a very easy loan to qualify for. There is no repayment until you permanently leave the home. You retain full ownership of your home and you can leave it to your heirs if you wish. You remain on title to the property just as you do now.
Qualifications: Applicants must by at least 62 years of age. In many cases the loan proceeds are used to pay off an existing loan, which eliminates your monthly house payment. You must live in the home as your primary residence.
Determination of Loan Amount: The maximum loan amount and consequently the amount of cash you will receive are based upon the following things. Your age(s), the current interest rate and the value of the home and how much you owe on you current home loan, if any.
Counseling: For your protection, all persons interested in a reverse mortgage are required to receive counseling. You can apply for a Reverse Mortgage prior to counseling, however in most cases processing cannot proceed without it. The counseling is provided by a neutral third party.
Expected Interest Rate: This interest rate is only used to calculate the available equity and as a result, the amount of money you can borrow.
Initial Interest Rate: This is the note rate on the loan. It is used to calculate the interest you will pay on the amount borrowed.
Payment Plans: Homeowners can choose from a variety of payment plan options:
- Tenure: Homeowner receives a monthly check for as long as they live in the home.
- Line of Credit: Homeowner has a line of credit that can be drawn on at any time up to the maximum amount available. The unused portion of available credit may earn interest, depending upon the loan program.
- Lump Sum Cash Advance: A lump sum of cash is distributed to the homeowner at closing.
- Modified Tenure: Any combination of the above options can be used.
Rights of Ownership: You remain on title to the home just as you do now. You DO NOT relinquish any property rights. You can never lose your home regardless of the amount of equity remaining at any time. You can stay in your home for the rest of your life if you choose to. No matter how much you owe. Remember the Reverse Mortgage loan is not due until you permanently leave the residence. Your property taxes and homeowners insurance must be paid current at all times.
Processing Time: It usually takes 30 to 45 days to complete the process.
Closing Costs: Normally the closing costs are financed into the new loan. You will be provided with a Good Faith Estimate of closing costs.
Interest Rate: The interest rate varies depending upon the program selected. All programs offer adjustable rates. One of our loan specialists will be happy to give you a quote.
Impact on Social Security and Taxes: Proceeds from a reverse mortgage home loan are not considered income. Therefore the funds you receive are not subject to income tax and they do not affect Social Security Benefits or Medicare Benefits. Remember you are using your equity. We recommend you check with your tax advisor for further details.
What about Family Trusts: If your home is in a family trust that is revocable you can refinance into a Reverse Mortgage. If it is in an irrevocable trust then the home cannot be financed with a Reverse Mortgage.
Repayment: Reverse mortgages become due and payable at the time the homeowner permanently leaves the home. If one spouse passes away and the other is still living at the residence, the Reverse Mortgage will not become due until the last spouse leaves the home permanently. The reverse mortgage can be repaid either from the proceeds from the sale of the residence or other assets. You can leave your home to your heirs if you wish. They can repay the loan and keep the home, or sell it and keep the remaining equity. It’s their choice. The reverse mortgage is a non-recourse type of loan. Your home is the collateral for the Reverse Mortgage, as with any other type of home loan. The lender has no claim or recourse against any other asset you own. You can never owe more than the value of your home.
Articles About Reverse Mortgages
Types of Reverse Mortgages: (click on type to learn more)
Questions? Review our Reverse Mortgage Frequently Asked Questions
Ready To Act? Apply Now and choose Reverse Mortgage as Purpose of Loan.
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