Reverse Mortgage - A form of mortgage in which the borrower doesn't make any payments and the borrowers equity in the home is the security. The loan does not need to be repaid until the borrower sells the property or moves out. A reverse mortgage allows homeowners that are 62 and older to unlock a portion of the equity in their home without having to make a monthly repayment. The amount that they can unlock will be determined by a combination of three things: 1)Youngest borrower's age 2) Lesser of their home's value or a lending limit (HECM and FNMA) 3) An interest rate.

Reverse mortgages (also called home equity conversion loans) or loans for the elderly, enable elderly homeowners to tap into their equity without selling their home. Repayment is not necessary until the borrower sells the property, moves into a retirement community or passes away. When you sell your home or no longer use it as your primary residence, you or your estate must repay the mortgage at that point in time. Reverse mortgages are sometimes viewed with suspicion. Reverse mortgages can be a valuable tool to provide income for elderly borrowers with equity in their home.

There are different ways to structure your reverse mortgage and it depends on your individual scenario and equity as to which plan makes the most sense to you.

Reverse Mortgage Structure

Tenure payment - receive a monthly payment for as long as you live in the home.

Term Payment - receive a monthly payment for a scpecific term..... say 3, 5 or 10 years

Lump sum cash - receive a lump sum of cash from your reverse mortgage

Or you can choose to use the reverse mortgage to not make any payments on your home again. All of the different structures here will have NO PAYMENTS for as long as you live in the home.

Contact us now to qualify for a home mortgage!

 

Misconceptions about reverse mortgages

• Misconception #1 - they can take my house away from me or foreclose on it - The lender will not foreclose on the property as long as you live in it. No one will come take your property away from you.
• Misconception #2 - I won't own the home with a reverse mortgage - You stay on title and continue to own the home........ you don't pay the mortgage until you sell the home or your heirs sell the home.
• Misconception #3 - What if I owe more than the value of the home - You can never owe more than the value of the home
  

Borrower Qualifications

• There are no credit requirments. Score doesn't matter
• You have to be 62 years of age or older and have enough equity
• You can even use this to keep your home from going to foreclosure (foreclosure bailout)
• Borrower must go through a counseling provided by a third party prior to obtaining a reverse mortgage

Lender Requirements

• All financing options must be provided to the homeowner.
• The borrower must be presented with the financial implications of entering into a home equity conversion mortgage.
• Proper disclosures must be provided to the borrower

Reverse Mortgage Basics

There are different types of reverse mortgages, but all share the same concepts. Listed below are the features that most have in common.

With a reverse mortgage you remain the owner of the home. As with any home the owner must still pay for the property taxes and homewners insurance. The homeowner is also responsible for making repairs to the property. The fees incurred on a reserves mortgage can be financed into the loan. The costs are added to the loan balance. The amount of money a homeowner qualifies for can depend on the specific reverse mortgage plan or program selected. It also depends on whether or not the homeowner chooses any cash advances. With each program the amount of money a homeowner qualifies for generally depends on their age and the home value. The older the applicant is and the more equity in the home will determine a greater amount of money available.
The debt you incur on a reverse mortgage equals all the loan advances received. This would also include money used to finance the loan or to pay off prior debt and also all the interest that is added to the loan balance.

Reverse mortgages generally are the primary loan on a home. Most reverse mortgage borrowers pay off any home debt with the reverse mortgage. The home owner may not have to pay off other debt against the home if the prior lender agrees to be repaid after the reverse mortgage is repaid. Generally only state or local government lending agencies are willing to consider subordinating their loans in this way. If the rising loan balance ever grows to equal the value of the home, the total debt is limited by the value of the home. You can never owe more than what a home is worth at the time the loan is repaid. The lender may not seek repayment from the homeowners income, other assets, or their heirs.

All reverse mortgages are due and payable when the last surviving borrower dies or permanently moves out of the home. Reverse mortgage lenders can also require repayment if property taxes and homeowners insurance are not paid or the homeowner fails to keep the home in good repair. On a reverse mortgage lenders generally have the option to pay for these expenses by reducing the loan advances and using the difference to pay these obligations. It is important that the borrowers family understand what is happening. The borrowers need to make them aware that there will be a balance to be paid when they pass away. The home is not owned free and clear. Part of the process of applying for a reverse mortgage includes a session with a 3rd party counselor. This person will help ensure that you understand which, if any, reverse mortgage is best for you. The counseling session is free to you, and the counselor is paid whether or not you actually get a reverse mortgage. This allows them to be impartial and help you make the best possible decision for your personal circumstances.

There are currently 3 reverse mortgage programs available. The most popular reverse mortgage program is the FHA insured Home Equity Conversion Mortgage (HECM). The second program is the Fannie Mae Home Keeper, and the third is a jumbo reverse mortgage (cash account) which is one of our proprietary program. With the exception of the Home Keeper, the HECM and the Cash Account can be structured in different ways (i.e. interest rate adjustment for HECM, point variation on the Cash Account). Reverse mortgages are a great way for an elderly person or couple to supplement income, especially if they are only getting social security as retirement income.  

In reference to the HECM (most popular reverse mortgage), the fees associated with this loan are regulated by the FHA. Typical fees you will incur inlcude normal closing costs such as title, escrow, appraisal, etc.... 2% charged by HUD on the lesser of lending limit or home value for initial mortgage insurance premium, Monthly servicing fee of between $25 and $30 that is set aside initially and added to the loan balance as the loan progresses. Loan to Value calculations, Credit requirements (FICO scores), and Debt to Income calculations are not used in determining how much a borrower can access in equity. For the HECM program, the amount that can be borrowed is based on the lesser of home value or lending limit, age of youngest borrower in the home, and an interest rate.

This is a great income supplement for those who need it.

A Reverse Mortgage borrower cannot be forced out of his/her home. Nor will he ever owe more than the value of his house. Reverse Mortgages are "non-recourse" loans, meaning in the rare case of drastic declines in home prices, the homeowner can never be held liable beyond the value of the subject home.

There are three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

Because this loan must be the first lien on the home, any existing mortgage balance must be paid with the proceeds of the reverse mortgage.  

A Reverse Mortgage is a financial tool. As you know not every tool is right for the job so consult with a mortgage professional first to see the difference in the programs offered so you can make an educated decision.