The Nitty Gritty of Reverse Mortgages
Curious about what a reverse mortgage is all about?
Well you are in the right place! Let’s explore all the things you need to know about a reverse mortgage. We get down to the nitty gritty on eligibility, conditions, lending amounts, and more!
KEY REQUIREMENTS OF ELIGIBILITY ARE:
- The youngest borrower on the title must be 62 years or older.
- Your home must be your primary residence and you must have equity.
- You’ll have to pay off any existing mortgages on your home with the reverse mortgage proceeds.
- You must live in a single family home, a townhouse, or condominium.
YOUR PRIMARY RESPONSIBILITIES ARE:
- You must still pay your property taxes & homeowners insurance for the life of the loan.
- As the homeowner, you’re responsible for the upkeep and maintenance of your home according to FHA requirements.
- Complete a HUD approved counseling session.
LOAN AMOUNTS ARE DETERMINED BY:
- Borrowers age.
- Home appraised value.
- Lending limits.
- Current interest rates.
- Balance (if any) of your existing mortgage.
- The program type: adjustable or fixed.
TYPES OF REVERSE MORTGAGES
There are two types of Home Equity Conversion Mortgage (HECM) loans. It is important to select the one that best meets your needs.
HECM REFINANCE LOAN: The HECM Refinance allows you to obtain cash out of the equity of your home.
HECM PURCHASE LOAN: The HECM Purchase loan enables borrowers to use the equity from the sale of a previous residence to buy their next primary home in one transaction with one initial investment (down payment) and without monthly mortgage payments.
FIXED VS. ADJUSTABLE RATES
Either HECM refinance or purchase loans can have fixed or adjustable rates. A fix rate gives you peace of mind as the rate stays the same throughout the duration of the loan. However, it limits the amount of cash you can get as well as any future advances. An adjustable rate allows future advances in the form of a line of credit, fixed monthly distributions, or tenure payments (cash for the rest of your life).
PAYING PROPERTY TAXES & HOMEOWNERS INSURANCE
Paying property tax and insurance every month can potentially become a burden to an fixed-income retiree. Life Expectancy Set-Aside (LESA) allows borrowers to set aside an amount of money upfront from their reverse mortgage proceeds for tax and insurance on their home through the life of their reverse mortgage loan. This option can mitigate the risk of default giving you peace of mind.
REPAYING YOUR LOAN
Loan repayment is not due as long as you meet the loan obligations such as living in the home as your primary residence, continue to pay required property taxes and insurance, and maintain the home according to FHA requirements.
You or your heirs will not be required to pay more than the value of your home at the time the loan is repaid; even if your loan balance exceeds the value of your home, provided you or your heirs decide to sell the home. Best of all, any remaining equity goes to you or your heirs once the loan is repaid.
If you are interested in specific details on your unique scenario please contact us and we can give you all the detailed information you will need.