Frequently Asked Questions About Reverse Mortgages
Q. Do I still own my home? Who is in title to my home?
A. You retain full ownership of your home. The title of your home always remains in your name—not in the name of the lender.
Q. Can title be held in the name of my trust instead of my name?
A. Yes, if it is revocable and it meets HUD’s requirements.
Q. Do I have to live in my home?
A. Yes. However, if you need to be hospitalized and moved into a health facility, you may be absent from your home up to 12 months.
Q. What happens if I die? Will the lender take my house?
A. No. After you pass away, your heirs may sell the home and pay off the loan or they can refinance the debt and keep your home. Any remaining equity reverts back to the sellers or their estate.
Q. When must the loan be paid back?
A. When the last surviving borrower dies, sells the home, or permanently moves away.
Q. Is there any prepayment penalty?
A. No. You may make a full or partial repayment at anytime without any penalty.
Q. Who pays my real estate taxes and insurance?
A. You pay real estate taxes and hazard insurance.
Q. What if the loan balance becomes greater than the value of my home?
A. A reverse mortgage is a “non-recourse” loan. You can never owe more than the value of your home at the time of repayment even if the loan balance exceeds the value of your property.
Q. Will the money from the reverse mortgage affect my Social Security or Medicare?
A. No, it does not affect Social Security and Medicare. It is suggested that you contact your local agencies and tax advisor for your specific circumstances.
Q. What kinds of reverse mortgage are available?
A.
- Federally-insured reverse mortgages. The most popular reverse mortgage (and highly regulated) is the federally-insured Home Equity Conversion Mortgage (HECM). Over 90% of all reverse mortgages are HECMs.
- Proprietary reverse mortgages. These reverse mortgages are backed by the companies that develop them. They have unique features and are used for higher valued homes with virtually no limit on home value or the amount of the loan.
Q. What is the role of the counseling agency? Is it required?
A. Independent counseling is required for all reverse mortgages. This mandatory counseling provides you with reverse mortgage information from a disinterested third party. The purpose of the counseling is to assure that the homeowner(s) understand the reverse mortgage program and determine if other options are available.
Q. Do I qualify for a reverse mortgage?
A. All borrowers on the title must be at least 62, or older, own a property with equity and occupy the home as your primary residence.
Q. How much money can I get from a reverse mortgage?
A. The amount available to you is based on a formula that factors in: program type, age of the youngest borrower, value of your home, interest rate, county your home is located in, and the amount of any liens against your home. We will help you in evaluating your options and calculate the maximum amount of money that will be available to you.
Q. How much does it cost to get a reverse mortgage?
A. As with a forward mortgage, you pay an origination fee and standard closing costs. If you choose a federally-insured Home Equity Conversion Mortgage (HECM-pronounced “heck-um”) you will pay a FHA insurance premium. All fees can be included in the loan so you don’t have any out of pocket expenses.
Q. How can I receive my money?
A. With most reverse mortgages you have a several payment options available to meet your needs.
- All at once (lump sum)
- Receive monthly payments for a fixed period of years
- Receive monthly payments for life (tenure)
- Line of Credit to be paid at your discretion
- Or a combination of the plans