What is a Reverse Mortgage?
A Home Equity Conversion (HECM) reverse mortgage is government-insured loan backed by the Federal Housing Administration (FHA). It enables senior homeowners age 62 and older to access a portion of their home’s equity and turn it into tax-free cash.* If you are committed to staying in your home, a reverse mortgage may be a powerful tool to secure financial security because unlike a traditional mortgage, you are not required to make any monthly mortgage payments.** There are minimal income and credit qualifications. In addition, a reverse mortgage is a non-recourse loan, meaning that you and your children will never have to pay more than the property is worth in a bona-fide sale.
Reverse Mortgage Requirements:
- Minimum Age: 62 All Applicants
- Eligible Properties: 1-4 Unit properties including HUD approved Condominiums, PUD’s and manufactured homes meeting HUD standards.
- Occupancy: You must occupy your home as your primary residence, maintain home in a reasonably good condition, and continue paying property taxes and homeowners insurance.
Is it right for you?
A Reverse Mortgage is definitely not for all. Borrowers looking for a short term loan may be better suited for a different type of financing as the loan requires insurance, origination and third-party fees that all must be financed making the loan impractical for a short term solution.
However, for those seniors who wish to remain in their homes for the foreseeable future and could benefit from supplementing their income, a reverse mortgage has proven to increase the quality of life and financial peace of mind. You’ve worked hard to build this asset, so now it may be time to let this investment work for you!
How much is available?
Reverse mortgage proceeds available are based on the youngest borrower and property value. Borrowers have a choice of how they can receive their money. After the current liens on the property are paid off, you can choose a number of different ways to receive cash. You can choose to receive the funds all at once, in monthly installments, as a line of credit you can access as you choose, or a combination of any or all of the above.
Regardless of how you choose to receive your reverse mortgage funds, you never make a monthly mortgage payment for as long as you live in your home.* While no mortgage payments are required under reverse mortgage loans, borrowers will be responsible for maintaining the real estate property taxes, hazard insurance premiums and home owner’s association fees current as well as expenses for the maintenance and upkeep of the property.
Fixed Rate Cash Lump Sum: For those who plan to take the full draw of their reverse mortgage funds in the beginning anyway, such as those paying off an existing mortgage or those planning to use the money immediately for other purposes, the fixed rate reverse mortgage will give you a little more security than a line of credit (due to a fixed interest rate). However, if you do not need to use your entire benefit to pay off any existing loans or liens, you could potentially get less money with the fixed rate option. Recent improvements to the fixed rate option have greatly reduced the costs involved.
Adjustable Rate Credit Line: Unlike Home Equity Lines of Credit offered by your local bank, the line of credit reverse mortgage cannot be closed or frozen. The line also increases in availability each month based on the unused portion. In addition, the line of credit may also enable you to access a greater benefit than the fixed rate reverse mortgage. Tenure Payment Plan: Sometimes referred to as an “annuity mortgage”, the proceeds made available to you may be structured into monthly installments to the homeowner that are guaranteed for life.
Reverse Mortgage Safeguards
Mandatory counseling is one of the first steps which may take place by either phone or in person for a reverse mortgage. The role of the counseling agency is to review your unique financial situations during this private session and explore any alternatives that may be available such as selling your home and downsizing, available city or state grants, or other alternatives that may be available to you.
Although not a requirement of the reverse mortgage loan, counselors are now required to ask potential borrowers about income, assets, debts and monthly living expenses in order to perform a budget analysis. Once you have completed this session you will be provided a counseling certificate which you will need to sign and deliver to your lender of choice.
As a lender we give you a list of counseling agencies. Only after a lender receives an application and signed counseling certificate we begin the processing of your reverse mortgage loan. See HUD’s guidelines to Prepare for Counseling.
Take the next steps…
The best way to get started is to talk things over. Give us a call at 888.595.3669 or request for a quick quote. We’ll be happy to speak with you at your convenience and help determine whether a reverse mortgage is right for you. As Americans, our homes are among the biggest financial commitments that we make. Many however do not realize that their home can provide substantial tax-free money*, just when they need it most. You’ve taken good care of your home over the years, and now your home can help take care of you-with a reverse mortgage from Lenox/WesLend.
*Consult your tax advisor regarding tax free status of loan proceeds.
** While no mortgage payments are required under reverse mortgage loans, borrowers will be responsible for maintaining the real estate property taxes, hazard insurance premiums and home owner’s association fees current as well as expenses for the maintenance and upkeep of the property.
What is the difference between a reverse mortgage and a home equity loan?
A home equity loan requires you to make a monthly mortgage payment each month. A reverse mortgage is different because you are the one receiving a monthly payment should you choose this option. Other than a monthly payment option, you could also choose to receive cash at closing, establish a line of credit with a potential for growth, or a combination of any of the payment options. Speak with your Lenox/WesLend Financial Mortgage Advisor about the right payment option for your financial needs.
Will I still own my home with a reverse mortgage?
Yes, you still own your home and keep title. With a reverse mortgage you continue to live in your home and own it with no monthly mortgage payment. It is your responsibility as the borrower to continue to live in their home as their primary residence as well as continue to pay homeowners insurance and property taxes. Additionally, you must maintain the home in good living condition.
How do I qualify?
You must be 62 years of age or older. There are no monthly mortgage payments required, however there are minimal income and credit requirement to qualify. You must occupy the home as your primary residence, maintain the home in reasonably good condition, and continue paying property taxes and homeowners insurance. Eligible properties include 1-4 unit properties including HUD approved Condominiums, PUD’s and manufactured homes meeting HUD standards.
Are there limitations on how I can spend my reverse mortgage proceeds?
Proceeds from a reverse mortgage can be used freely by the borrower for any purpose. Many have used their reverse mortgage proceeds to increase quality of life, pay off debts, fund home improvements, travel or make ends meet.
How do I repay the loan?
You do not have to repay your loan balance for as long as you live in your home. A reverse mortgage must be paid in full when the last surviving borrower dies or sells the home. Either you or your heir(s) can simply pay off the reverse mortgage or the home can be sold to repay the loan. Any remaining funds will go to you or the estate where it will be distributed according to your instructions.
Will my heirs inherit the liability if I owe more than what my home is worth upon repayment?
No other assets can be touched to repay the loan except the home. Since FHA insures the loan, FHA would cover the shortfall if there was no equity remaining in the home. Your heirs are NOT responsible for a debt greater than what the house is worth if no equity was left at the time of loan maturity.
How do I start?
Here at Lenox/WesLend Financial, we want to provide you, along with any of your trusted advisors with all the reverse mortgage information you’ll need to make an informed decision. Give us a call at 888.595.3669 or request a quote by selecting the quick quote button below. We’ll be happy to speak with you at your convenience and help you confidently determine whether a reverse mortgage is right for you!