More Questions About Reverse Mortgages
Additional Information
If I choose a line of credit, does the bank pay me interest on the unused portion?
No. The lender does not pay interest on a Reverse Mortgage. However, the lender provides a Credit Line Growth rate (a percentage) on your unused line of credit. The line of credit grows at the SAME EXACT INTEREST RATE charged on your loan plus 1/2%. This is why a Reverse Mortgage has a huge advantage over a Home Equity Loan (HELOC). You don't have to refinance to get more cash with a HECM as you would with a HELOC; you just leave the money in the line of credit and allow it to grow until you need it.
Would a "Living Trust" be eligible for a Reverse Mortgage? What about a Life Estate?
A homeowner who has put his or her home into a revocable living trust can take out a Reverse Mortgage. A Life Estate is acceptable for Reverse Mortgages as well as Power of Attorney and Guardianship. The borrower must provide these documents to the lender ,and the Reverse Mortgage Lender must review these documents as part of the loan process.
How many times can I refinance my Reverse Mortgage?
You can do a reverse mortgage as many times as there is sufficient equity.
Can my plan be changed during the Reverse Mortgage?
Yes. You can change from a line of credit to monthly payments or vice versa at any point in your Reverse Mortgage. (There is a small fee.) You will have to sign forms changing the structure of your plan, but it can be accomplished. After all, it's your money to structure for your needs.
Can I make payments on the reverse mortgage?
Although it is not required, lenders will accept monthly payments or whatever payment you wish to make at any time.
Are there other HECM programs for reverse mortgages?
There is a HECM for Purchase program. For senior borrowers who have either outgrown their home and want a new surrounding, perhaps all on one level, or those who wish to move to another state, the purchase program can fill those needs. The qualifications are similar. But the borrower must occupy the property within 60 days of closing, and there are also financial eligibility requirements. If you are interested in this program, please ask your reverse mortgage specialist. Naturally, there are no monthly mortgage payments.
Common Misconceptions
Rumors Abound. Let's Set the Record Straight.
Your home must be debt free to qualify.
FALSE. If you have an outstanding mortgage or equity loan balance, and as long as there is enough equity, you may be able to pay off your mortgage and qualify for a Reverse Mortgage. All current mortgages and judgments or liens must be paid from the Reverse Mortgage proceeds and are then added to your Reverse Mortgage balance. A Reverse Mortgage specialist will advise you of the amount you qualify to receive and if your current mortgage balances cause a shortfall which would preclude you from doing the loan. Sometimes, borrowers pay the shortfall at closing if this is feasible.
Only senior citizens low on cash can benefit from a Reverse Mortgage.
FALSE. Seniors from all walks of life are taking advantage of Reverse Mortgages. Even though some borrowers may have greater needs than others, a Reverse Mortgage can be an excellent financial or estate planning tool for anyone. Even millionaires are getting Reverse Mortgages! Homeowners with high value homes are using Reverse Mortgages in a variety of ways. Protecting their estate from some of the estate tax after their passing can be accomplished with a Reverse Mortgage since a Reverse Mortgage places a lien on the property, and that lien is not subject to estate tax. (Consult with your tax advisor.)
Only those who have excellent credit, sufficient income, and good health can qualify for a Reverse Mortgage.
FALSE. Although there will be a Financial Assessment to determine whether a reverse mortgage borrower can maintain the taxes and insurance on their home, you can still obtain a Reverse Mortgage once approved by the lender.
Bankruptcy, foreclosure, and judgments prevent you from obtaining a Reverse Mortgage.
FALSE. Borrowers who are currently in bankruptcy or foreclosure may be able to secure a Reverse Mortgage. Your bankruptcy trustee may give permission for the Reverse Mortgage to go forward. But you must show you've been on time with your payments for 12 months. Consult with your attorney and your Reverse Mortgage specialist for details.
I will have to make monthly payments if I have a Reverse Mortgage.
FALSE. With a Reverse Mortgage, you never make any mortgage payments. However, if you desire to make payments or defray the costs, the lender will accept them.
The lender will take title to my home and own my home if I take out a Reverse Mortgage.
INCORRECT. You retain title and ownership of your home throughout the life of the Reverse Mortgage. The ONLY way any mortgage company can take your home from you is through a foreclosure action, whether forward or reverse.
My heirs will be personally responsible for my debt.
FALSE. Since the Reverse Mortgage is a non-recourse loan (a loan secured by collateral, usually real property, in this case a home), your heirs are not personally responsible for the loan. The lender can only look to the sale of the property for repayment of the debt. Your heirs, however, may wish to keep the remaining equity by selling the home or they might decide to keep the home by obtaining their own mortgage. (In the case of keeping the home, the full balance of the Reverse Mortgage will be due.)
GOT QUESTIONS?
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You are entitled to get your questions answered so you can make an informed decision. Your Reverse Mortgage Specialist will answer your questions, provide free, no-obligation comparisons and proposals, and help you better understand Reverse Mortgages.
