• Tax free income insured by the Federal Government which may, depending on equity at the outset, continue as long as your home is your primary residence.
• Change your plan at any time from a line of credit, cash out, monthly checks, or a combination (depending on what remains.)
• The HECM Line of Credit (LOC) option has many advantages for the borrower. First, the line of credit grows over time at the SAME EXACT rate as the interest rate on the loan and an additional 1/2%. If you allow the line of credit to remain untouched or a good portion of it for years, the line will be substantially larger at the end of that period at which time you can tap into some or all of the line of credit.
• A great option for seniors wanting to remain in familiar surroundings and in the same community where they've lived for years. Moving from one's home can cause emotional turmoil and stress. Memories were made in your "home sweet home", and proximity to loved ones may provide a better option.
• Reverse Mortgages can satisfy existing mortgages or other debt if there is enough equity in your home to pay them at closing. Note: These debts will be transferred to your Reverse Mortgage and interest will accrue.
All the closing costs for a reverse mortgage can be financed in the loan except the appraisal and HECM counseling fee. However, your HECM counseling fee required by HUD can be included in your closing fees if the HECM counseling agency is willing to wait for closing. The counseling fee can also be waived based on your financial status. Here are some of the typical reverse mortgage fees:
FHA MORTGAGE INSURANCE
This fee which is financed into the loan is 2% of the appraised value of your home and .5% on the ongoing/outstanding balance. You will receive a statement each month showing how the loan accrues. This statement also shows the current balance, line of credit, any growth on your line of credit, the current interest rate, and other pertinent information.
This fee is the lender’s fee charged for doing your loan which would include their work to process and underwrite the HECM. The maximum origination fee is set by FHA and is 2% of the first $200,000 of your property value and 1% over $200,000. The maximum origination fee is $6,000.
* Lender's Title insurance
* Settlement or closing fee
* Endorsements
* Notary Fee
* Recording fees
* Courier fee / Overnight
* Document preparation
* Flood certification
* Credit report
* Searches/Patriots
* Tax Cert Fee
* Deed Prep Fee (if applicable)
* SAT recording fee (to record the payoff
of a current mortgage, equity loan, lien, or judgment).
* Attorney fee (NY): In some states, it is required
you have an attorney to represent you at the closing.
It is required that all Reverse Mortgage borrowers obtain HECM counseling from an independent HUD approved counselor. Once counseling is complete, the counselor will issue a HECM counseling certificate. The Reverse Mortgage loan cannot proceed without this signed certificate signed by both borrower and counselor. The HECM counseling fee is approximately $125-$175 and can be done in person or over the phone. (During COVID-19, counseling is being done by phone.)
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Your home's equity is waiting for you to use it for your benefit. Why not let your home pay for your retirement? I have spoken with many senior homeowners who didn't have enough money saved for retirement and were thrilled to use their equity for a variety of needs. Using a reverse mortgage as a retirement planning tool can change the way you look at retiring. You don't always do a reverse mortgage out of desperation, you do it because you realize there is untapped wealth under your roof waiting to be accessed.
Reverse Mortgages offer the following safeguards: No pre-payment penalty, reverse mortgage counseling, government insured and regulated by HUD, FHA mortgage insurance to protect you, 60% cap on proceeds for the first year, non-recourse loan-- you can never owe more than the home is worth, protection for non-borrowing spouses/underage spouses, 3 Day Right of Rescission just in case you change your mind after closing.
As mentioned before, with a Reverse Mortgage, you can never owe more than your home is worth and probably will not pay the loan off in your lifetime. This is due to a feature written into the reverse mortgage called "non-recourse." Your heirs are also not responsible for the debt as well. Assets or bank accounts can never be attached to pay off the loan no matter how much money you have. "A nonrecourse debt is a type of loan secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount." (Investopedia)
REMEMBER: The house alone stands for the debt. A reverse mortgage is a loan in which a lender may look only to the property for repayment even IF the loan balance goes beyond the value of the home. If you sell the home to repay the loan or if all borrowers pass away, you or your heirs will never owe more than the balance of the reverse mortgage or 95% of the appraised value of the property, whichever is less.
* An equity loan (if you qualify) may be a cheaper way of getting cash out of your home as closing costs may be lower. But you will still have to qualify with your income and credit, and once you draw funds, there is a monthly mortgage payment.
* If your primary goal is fixing up your home and a community loan is available with adequate funds, this may be a better option.
* If you are ill and assisted living or a nursing home is imminent, do not choose a Reverse Mortgage.
* If your children offer their home for you to move to, and you can spend your remaining years with your family, this may be a better alternative than staying in your home and having a reverse mortgage.
We hope this has helped answer questions as to when to do a Reverse Mortgage and when not to do a Reverse Mortgage.
Got questions?
888-843-9797 / 631-804-9044
The Line of Credit That Doesn't End
Not having to pay monthly mortgage payments is a great feeling. But what's even better is having a Reverse Mortgage Line of Credit. You can draw on your credit line whenever you need to whether to enjoy life more or just to pay some bills.
The HECM line of credit stays open so the funds are there when you need them. The unused HECM line of credit grows over time at the current interest rate on the loan plus 1/2%. You can keep some or all of your line of credit intact and watch it grow, then draw the funds at your leisure. Or you can withdraw the entire line of credit when it becomes available one year after your loan funds. And until you draw money from your line of credit, no interest will accrue on those funds.
Your credit line cannot be closed at the bank's discretion as with some HELOCS. If you do not use the line of credit, you do not owe it. And remember, the earlier you take out a reverse mortgage and establish your line of credit, the more you'll have available over the coming years.
