Frequently Asked Questions About Reverse Mortgage Loans
Frequently Asked Questions About Reverse Mortgage Loans
I’m here to give you the information you need to make an informed decision.
Does the reverse mortgage lender own your home?
Answer:
You remain the owner of your property. There is no change to the deed or title of your home when completing a reverse mortgage.
What if I live in Florida for half the year?
Answer:
That’s fine, you just need to live in your primary residence for six months and a day.
Will your heirs receive more or less after you pass away than they would without a reverse mortgage?
Answer:
It depends on what you do with your overall finances. Some families will receive more by being more efficient with the use of their portfolio of assets. It’s very important that you consult with your financial advisor to make the best use of a reverse mortgage for your specific situation.
What if I go into a nursing home?
Answer:
As long as you are simply rehabilitating and getting better, your home and reverse mortgage are still yours until two doctors agree it is impossible for you to ever return to your home.
When does the reverse mortgage have to be paid back?
Answer:
Your reverse mortgage will become due when one of these things happen:
- You sell your home.
- You permanently move out of your home.
- The last person on the title passes away.Â
Your heirs will have two options. They can choose to sell the property, pay off the reverse mortgage balance and keep any remaining equity, or they can choose to keep the property by refinancing the balance of your reverse mortgage with a new mortgage in their name. Remember, if the loan balance ever exceeds the home value, it does NOT trigger an early payoff or cause you to have to move out of your home.
If you took all of the money from the reverse mortgage in a lump sum and spent every bit of it, would you be able to go on living in your home?
Answer:
Yes, your reverse mortgage will not become due until you pass away, sell your home or are no longer living in the home. If you use all of the available proceeds, you would not have any more money available and interest would accrue until one of the three events referenced above occurred.
What happens if, at any time, the amount you owe under a reverse mortgage is greater than what your home is worth?
Answer:
Nothing as long as you still live in your home and pay taxes, homeowners insurance and maintenance.
If you get a reverse mortgage, how does that affect the amount of money that you would leave to your children or other heirs?
Answer:
Most likely, it will decrease the amount of money the heirs will receive from the value of the home. However, your overall net worth will likely get better, because you will not be spending as much from your other accounts.*
When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?
Answer:
You remain the owner of your property. There is no change to the deed or title of your home when completing a reverse mortgage.
There are several "payment options" or ways to get money from a reverse mortgage. Which payment option best meets my needs?
Answer:
It depends on your situation. Our trained loan officers have helped hundreds of seniors pick the best option for their personal situation. You can do a lump sum payment, ongoing monthly payment or a line of credit allowing you to access your money as you need it. Your line of credit will be guaranteed to grow every year that you don’t use it.
What happens if you change your mind later and want to change your payment plan?
Answer:
As long as you still have money available to borrow from your reverse mortgage, you can change your disbursement option for a small, one-time fee. Remember, when the value of the loan is higher than the home value it does not trigger an early payoff or due date.
When you have a reverse mortgage, do you have to make a monthly mortgage payment to the bank?
Answer:
No, but for tax or cash flow purposes, including Medicaid planning, you may wish to do so.
What basic responsibilities will you continue to have after you get a reverse mortgage?
Answer:
The homeowner remains responsible for the payment of annual property taxes and homeowners insurance as well as basic upkeep of the property.
What may happen if you do not keep up these responsibilities as a borrower?
Answer:
If you do not continue to do these three basic things, the lender is required by HUD to foreclose.
When you purchase a home with a HECM, will the HECM be held on your existing home or your newly purchased home?
Answer:
The HECM will be held on the newly purchased home as your primary residence.
How will the lender determine how much money you will need at closing?
Answer:
The down payment you will need to bring to closing will be determined based on your age, interest rates at the time and the sales price (or appraised value, whichever is less) of the home you are buying.
What sources of funds (money) are allowed when you purchase a home with a HECM?
Answer:
The money must come from your own liquid assets (bank accounts, CDs, retirement accounts, etc.) or from the documented sale of other assets you may have (your present home, for example).
Why is my down payment higher when using a reverse mortgage loan to purchase a new home?
Answer:
Your down payment is higher initially because you will never be required to make a monthly payment (except for taxes, insurance and maintenance). With a traditional mortgage you would potentially lose more in cash flow over the years because of the consistent required payments. Remember, the HECM for Purchase can also allow you to purchase a more expensive home than you would otherwise be willing to commit to in payments for the next 20-30 years.
