STAY IN YOUR HOME
NEVER MAKE ANOTHER MORTGAGE PAYMENT*
*Borrower(s) are responsible for keeping all property charges, including insurance and taxes, current and the home in good repair.
WHAT IS A REVERSE MORTGAGE?
A reverse mortgage is a loan for senior homeowners that allows for use of a portion of the home’s equity as collateral. When property charges (typically real estate taxes, hazard insurance, flood insurance and assessments) are paid current, the loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the Loan Servicer will assist the estate to repay the balance of the reverse mortgage with options including the sale of the home to pay off the outstanding balance.
All remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.
The program is highly regulated and includes many Borrower safeguards to ensure a safe and secure transaction for the Borrower(s) offered through the Department of Housing and Urban Development (HUD). The reverse mortgage program (also known as the Home Equity Conversion Mortgage (HECM) Program) requires your participation in a reverse mortgage consumer information counseling session conducted by a HUD–approved counselor, before originating your loan application.
Today’s reverse mortgage provides you with many features and benefits. Your experienced and professional Moneyhouse Mortgage Loan Originator will assist you in providing choices for the “Right Fit” program that will meet your specific needs.
You can select from various payment plans to determine the best way to disburse the loan proceeds.
Did you know that you can also purchase a new home with the HECM For Purchase (H4P) option? If you have the funds to close to pay for the difference between the loan proceeds available through the HECM and the property sales price including loan closing costs and fees, then the H4P may be right for you.
After closing a reverse mortgage, you are not required to make a monthly mortgage payment. However, you must continue to pay all property charges when due and keep your home in good repair.
Educate yourself, talk it over with your children and trusted advisors and then call one of our experienced, professional Mortgage Loan Originators at (855) 240-5626. They’ll help you with getting the “Right Fit” reverse mortgage that’s best for your needs.
- Know the Benefits
- Choose the payout option that works for you
- No monthly mortgage payments are required; payment of all property charges when due is required
- Maintain home ownership, own and live in your home while receiving cash
- Generally will not affect your social security
- Common Misconceptions
- Difficult to qualify
- Liable for the loan balances that exceed home value
- The bank owns your home
- Reverse Mortgages are expensive (prices vary by product)
- Easy to Qualify
- Proceeds based upon the age of the youngest Borrower
- If you own your home or have a large amount of home equity
- Your home is your primary residence
To be eligible for a HECM reverse mortgage, the Federal Housing Administration (FHA) which provides a government guarantee to Moneyhouse as the Lender and you, the Borrower(s), requires that all homeowners be at least age 62 to apply and loan proceeds available are based upon the age of the youngest Borrower. Certain exceptions apply for those situations where a non-borrowing spouse may be on title. If the home is not owned free and clear, then any existing mortgage must be paid off using the proceeds of the reverse mortgage loan, in addition to any other liens or encumbrances, at the time of closing. In addition to property eligibility, you must meet financial eligibility criteria as established by HUD.
■ When Does a Reverse Mortgage Become Due and Payable?
A reverse mortgage typically does not become due and payable as long as you meet the loan obligations. For example, you must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, flood insurance and assessments in addition to maintaining the home property condition according to HUD/HA requirements.
■ Estate Inheritance
In the event of death of all Borrowers or in the event that the home ceases to be the primary residence for more than 12 months for all Borrowers, the Borrower’s estate can choose to repay the reverse mortgage or put the home up for sale as assisted by the Loan Servicer.
If the equity in the home is greater than the outstanding balance of the loan, the remaining equity belongs to the estate.
If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. A Borrower protection for today’s reverse mortgage is known as “non-recourse”, wherein the property stands for the debt and no other estate investments, second homes, cars, and other valuable possessions or assets can be taken from the estate to pay off the outstanding reverse mortgage.
The amount of proceeds that are available generally depends on four factors: age, current interest rate, appraised value of the home and government imposed lending limits. Use the Moneyhouse calculator to initially estimate how much you could receive in available cash proceeds. Please note that you may need to set aside additional funds from loan proceeds to pay for property charges.
■ Distribution of Proceeds
There are several payment plan options to receive the proceeds from a reverse mortgage:
- Lump Sum – a lump sum of all cash available at closing.
- Tenure – equal monthly payments as long as the at least one Borrower lives in the home as their primary residence.
- Term – equal monthly payments for a fixed period of time.
- Line of Credit – draw any amount at any time from the line of credit with a revolving ability to repay and redraw in addition to a credit line growth rate.
- Any combination of payment plan options listed above with the ability to change the plan, based upon remaining funds at any time in the future.
■ Difference Between a Reverse Mortgage and a Home Equity Loan
Unlike a Home Equity Line of Credit (HELOC), the HECM does not require the Borrower to make monthly mortgage payments and any existing mortgage or mandatory obligations must be paid off using the proceeds from the reverse mortgage loan.
Many seniors use the remaining proceeds to fund medical expenses, make home repairs or just keep the extra cash in case of an emergency for that “rainy day”. In addition, unlike a HELOC, the lender cannot reduce a HECM reverse mortgage line of credit.
With a reverse mortgage the amount that can be borrowed is determined by the HECM program formula that considers age, the current interest rate, and the appraised value of the home.
As stated previously, with traditional loans the Borrower(s) is required to make monthly payments of principal and interest, however with a reverse mortgage, no monthly payment is required. Unlike a traditional mortgage loan, the loan is typically not due and payable as long as at least one Borrower lives in the home as their primary residence, continues to pay required property charges and maintains the property in good repair.