| 1. |
How can I choose to receive my money? |
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You can choose to receive the money from a reverse mortgage in several different ways.
- All at once, in a single lump sum of cash;
- As a regular monthly payment, either for life or a designated period;
- As a "credit line" account that lets you decide when and how much of your available equity is paid to you;
- Or a a combination of the above payment methods.
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| 2. |
How much money will I be eligible for? |
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The amount of money you get from a reverse mortgage depends upon your age (or age of youngest borrower on the title), appraised home value, current interest rates and the lending limit in your area.
In general, the older you are and the more valuable your home (and the less you owe on it), the more money you can get. |
| 3. |
What do I need to do to qualify for a reverse mortgage? |
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As long as you own a home, are at least 62 and have enough equity in your home, you can get a reverse mortgage. There are no special income or medical requirements.
The only credit requirement is that you cannot be in default on a HUD insured mortgage. Bankruptcy, foreclosure and late payments are allowed. |
| 4. |
When do I pay back my loan? |
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No monthly payments are due on a reverse mortgage while the home remains your primary residence. The loan is repaid when the last remaining borrower on title ceases to occupy the home as a principal residence, whether you pass away, sell the home or permanently move out.
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. |
| 5. |
Does the lender take the house? |
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No, this is a common misconception. the title remains in your name. Your home and any equity remaining will be passed on to heirs. Upon vacating your home as your primary residence the loan must be repaid. |
| 6. |
Do my heirs have the right to keep my home? |
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Yes. As long as they repay the loan with any available funds or through a refinance, they do not have to sell the property. |
| 7. |
Am I eligible for a reverse mortgage? |
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To qualify for a reverse mortgage, you must:
- Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if their names appear on the title to the home.
- Be a home owner with equity in your home. You may qualify even if you have an outstanding balance on your first mortgage. Single-family homes and qualified condominiums, townhouses, manufactured homes, and 1- to 4-family owner- occupied residences are eligible. Reverse mortgages are available only for homes occupied by owners as a principal residence.
- If one spouse or co-owner is under 62, that person’s name must be removed from the title so that the other person can qualify for the reverse mortgage.
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| 8. |
How much money can I get? |
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This depends on a few factors, including your age, the value of your home, the amount of built-up home equity, and interest rates at the time of origination. Other factors are the type of reverse mortgage product and particular payment option you select. |
| 9. |
What are my payment options? |
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You decide how to receive the money generated by a reverse mortgage. Your payment options are:
- An up front lump sum payment;
- Line of credit;
- Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period); or, if you choose,
- A combination of monthly income and line of credit.
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| 10. |
How much does a reverse mortgage cost? What are the up front and closing fees? |
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Many of the same costs associated with a regular mortgage apply to reverse mortgages. You will be charged an origination fee, a mortgage insurance premium (for FHA Home Equity Conversion Mortgages), an appraisal fee, and certain other standard closing costs. In most cases these fees and costs are capped and may be financed as part of the reverse mortgage, so that you incur little out-of-pocket expense. |
| 11. |
Do I need to get an appraisal of my home to get a reverse mortgage? |
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Yes. Since the value of your home is a factor in determines how much money you can get from a reverse mortgage, an appraisal is required. Normally the lender will order the appraisal, which is paid for by the borrower at the time of application. |
| 12. |
Do I need a lawyer to apply for a reverse mortgage? |
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Legal counsel is not required. However, NRMLA encourages you to seek the advice of a legal, tax, or financial advisor before committing to a reverse mortgage. |
| 13. |
Am I required to receive counseling before I get a reverse mortgage? |
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Yes. Counseling is required for all three reverse mortgage products currently available in the marketplace. The counselor’s job is to make sure you are informed about reverse mortgages and other options. You can get the name of a local counseling agency or qualified telephone counselor from a reverse mortgage lender or by calling the National Foundation for Credit Counseling (866-698-6322), Money Management International (877-908-2227), AARP (800-209-8085), or HUD’s Housing Counseling Clearinghouse (800-569-4287) |
| 14. |
Who owns title to my home while my reverse mortgage is outstanding – the bank or me? |
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You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage. |
| 15. |
Am I required to pay anything during the course of the reverse mortgage loan? |
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No. The flow of payments is reversed during the term of the reverse mortgage – the lender pays you. However, you are responsible for keeping up payments on your homeowner’s insurance and property taxes, and to maintain the condition of your home. |
| 16. |
Are there any limits on how I can use the funds from a reverse mortgage? |
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No. Borrowers have used reverse mortgages for a variety of purposes, such as paying health care expenses, supplementing retirement income, financing home repairs or modifications, or visiting friends and family. Some have used a reverse mortgage to purchase recreational vehicles, start a small business, and travel. Others have used reverse mortgages to eliminate expenses by paying off mortgages and credit card debt. The only limit on how you use a reverse mortgage is your imagination. |
| 17. |
What is the interest rate on a reverse mortgage and how is it determined? |
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The interest rate varies by type of reverse mortgage.
- For the HECM, the most popular product, the interest rate is adjusted either monthly or annually (the borrower chooses) and based on an index called the “1-Year U.S. Treasury Constant Maturity Rate,” which changes weekly. For monthly adjusting HECMs, the interest rate currently charged is equal to the 1-Year Treasury rate plus 1.00% to 1.500% (as of April 1, 2007).
- For annually adjusting HECMs, the interest rate currently charged on the loan for the next year is equal to the current 1-Year Treasury rate plus 3.1%. (As of April 1, 2007).
- For Fannie Mae Home Keeper loans, the interest rate charged on the loan for the next month is equal to the current “1-Month Certificate of Deposit Secondary Market Rate” plus 3.4%.
- For the Cash Account “jumbo” loan, the interest rate charged on the loan for the next six months is equal to the current LIBOR rate (London InterBank Offered Rate) plus a margin.
The latest 1-Year Treasury rate and 1-Month CD rate are issued by the Federal Reserve Board, and are published along with the LIBOR rate in financial newspapers. Interest charged on a reverse mortgage is “accrued.” That is, there is no payment of interest until the loan comes due. |
| 18. |
How much will be owed when my reverse mortgage comes due? |
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The amount owed to the lender typically includes the amount borrowed to date, the amount of accrued interest, accrued mortgage insurance premiums (for the HECM), servicing fees, and any other costs and fees financed as part of the loan amount. In no event will the repayment amount exceed the value of the home at the time the loan comes due. There are no pre- payment penalties for the current reverse mortgage products. |
| 19. |
What happens if I move out of my house after I get a reverse mortgage? |
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You may live outside your home for up to 12 consecutive months before the loan must be repaid. In general, a reverse mortgage comes due when the borrower dies, permanently moves out, or sells the home. |
