Reverse Mortgage FAQs

What is a Reverse Mortgage? | BACK | A reverse mortgage is a special type of loan designed for older homeowners to get needed cash or monthly income. The money from a Reverse Mortgage can be used for any purpose. There are no payments required as long as the home is occupied by the borrower. It is due in one single payment when the last surviving spouse sells, moves away permanently, or passes away. Reverse Mortgages are backed by the U.S. Government or major financial institutions. How a Reverse Mortgage Works A reverse mortgage allows older homeowners to tap into their equity without the requirement of monthly payments. The amount available is based on age, the value of the home or maximum claim amount and current interest rate. A sum of money is provided in cash, a line of credit to draw from, or a monthly income. The loan is due when the last surviving borrower moves, sells the home or passes away. Then the entire loan balance is due. The loan balance includes the amounts advanced, fees and interest charges that have accrued over the life of the loan. Since the home remains in the homeowners' name they or their estate benefits from the appreciation. The Application and Documentation The first step is applying. The borrower can meet with a Reverse Mortgage Loan Specialist in their home, office or request and application by mail.The application package contains a detailed explanation of the program, disclosures and a sample copy of the closing documents.We will require the following documentation: Copy of your photo ID and Social Security or Medicare card Name and phone number of your homeowners insurance agent. If you have an existing mortgage to be paid off, we will need the name of the lender and loan number. If you have a living trust, we will need a complete copy of the trust and we also will require a HUD Counseling Certificate. We do not ask for any money from you, all closing costs are included in the loan Processing, Underwriting and Closing We will order the appraisal. The inspectors will call you to schedule a time that is convenient for you. Once all of the necessary documentation is received your loan package is submitted to the underwriters. Loan approval is back within a few days and we will call you to confirm how you want to receive the money and schedule a time to come to your home to sign the loan documents. After a three day period that allows you time to completely review the documents, the loan is funded. If you requested an initial draw, it is wired into your account or a check is mailed to you. Any existing debt is paid off and a new lien is placed on your home. If you selected a monthly payment, you will receive it in the first week of the following month. If you selected a line of credit, it will be made available to you. You will receive regular statements on your account. Repayment You do not have to make any payments during the life of the loan. It becomes due when the last borrower moves, sells or passes away. If heirs want to keep the house and not sell, they may pay off the loan balance through refinance or their own funds. FHA guarantees the amount to be paid will never exceed the value of the home. How do I qualify for a Reverse Mortgage?| BACK | A reverse mortgage is easy to obtain, provided that: 1. You are at least 62 years of age or older. 2. Your home is, or is to be, occupied as your primary residence. 3. You have substantial equity in your home (proceeds of the reverse mortgage can be used to pay off existing liens or mortgages). What can I do with the money? | BACK | You can use the money you receive from your reverse mortgage in any way you choose: • Supplement your income • Home improvements • Purchase of a new home • Pay off a current mortgage • Medical expenses • Pay off debt • Buy a new car • Travel • College tuition or gifts to family How much money can I receive? | BACK | The amount of money you can receive from a reverse mortgage is determined by your home value, the number and age of the homeowner(s) and the current interest rate. We will assist you in evaluating your options and calculate the maximum amount of money that will be available to you. How do I receive the money? | BACK | With a reverse mortgage, you have five payment plan options to choose from: 1. Tenure Option: Receive equal monthly payments for as long as you occupy your home as your principal residence. 2. Line of Credit: Draw cash from your reverse mortgage whenever and in whatever amount you choose, up to the available limit. Interest is only charged on the funds drawn from the line of credit. 3. Lump Sum Cash Advance: You can receive all of your money in a lump sum upon the closing of your reverse mortgage. 4. Modified Tenure: Set aside a portion of the loan proceeds as a line of credit, in addition to monthly payments. 5. Term: Receive equal monthly payments for a fixed period of time that you select, for example 5 or 10 years.You can change payment plans as frequently as you wish for a very small fee. How is interest charged on a Reverse Mortgage? | BACK | The interest on a reverse mortgage is adjustable and is tied to readily available market indices. The initial rate is determined at loan closing and adjusts either monthly or annually. Interest charges do not affect your monthly payments and you are only charged interest on your loan balance, which consists of the cash you have received and the financed closing costs.   Interest Rate Options: The Monthly Adjustable option is based on the 1- year Treasury Bill Index and a margin . The lifetime rate cap is 10 points above the initial rate. Monthly Adjustable: 1 Yr. T-Bill + 1.5% Lifetime cap = 10% above start rate no monthly or annual cap The Annual Adjustable option is based on the 1-year Treasury Bill Index and a margin. The Annual Adjustable Rate does not change by more than 2 points per year and the lifetime rate cap is 5 points above the initial rate. Annual Adjustable: 1 Yr. T-Bill + 3.1% Lifetime cap = 5% above start rate Annual cap = 2% Current Reverse Mortgage Interest Rates What costs are involved with a Reverse Mortgage? | BACK | As with a regular mortgage loan, there are closing costs involved with a reverse mortgage as well. These fees can be financed into the loan, and typically include the cost of the appraisal, title insurance, loan origination, escrow and recording fees. We will be happy to provide you with a good faith estimate of the costs involved. When does the Reverse Mortgage need to be repaid? | BACK | The reverse mortgage becomes due and payable when the borrower permanently leaves the home. Whether they move, sell or pass away. Reverse mortgages are typically repaid from the proceeds of the sale of the home, with any remaining equity staying with the homeowner or their heirs. If a spouse passes away, the surviving spouse continues to receive the full benefits of the reverse mortgage, with no repayment until they decide to permanently leave the home. Do I still own my home? | BACK | Absolutely. You retain full ownership of your home when you obtain a reverse mortgage. As with any mortgage, the lender has a loan against your property. Since you make no monthly payments the loan balance increases over time. When the loan is repaid the borrower or their heirs pay off the loan balance, which consists of the financed closing costs, the cash advanced from the reverse mortgage and the interest that has accrued. The remaining equity stays with the homeowner or their heirs. What is a Counseling Certificate? | BACK | To qualify for the Reverse Mortgage you are required to meet with an independent reverse mortgage counselor. This free counseling session will help you determine whether a reverse mortgage is right for you. The counseling session can be done either in person or on the telephone, and family or trusted friends are encouraged to participate. At the end of the meeting you will receive a Certificate of Borrower Counseling. Please call 1-800-266-9010 for a list of qualified counselors in your area.