Top 10 Questions Answered
Your Top 10 Reverse Mortgage Questions Answered!
Talking about Reverse Mortgages can be a scary time. It’s a decision concerning the largest single investment you have ever made, and the one thing you don’t want to lose. We have been doing this a long time and we have answered some of the most common questions we get on a daily basis. Hopefully this will give you some good information about Reverse Mortgages.
1. What exactly is a Reverse Mortgage and how do I qualify?
A Reverse Mortgage is a government backed loan that allows homeowner(s) the age of 62 or older to pull off the equity built up in their home. There are a few different ways this can be paid which we will go over in question #10. The best part about this loan, is that it requires no repayment until the homeowner(s) no longer live in the home. This federally insured loan was created by The United States Department of Housing and Urban Development (or HUD) to help the seniors meet their ever increasing monetary needs, and be able to sleep easier at night.
Reverse Mortgages have no income or credit requirements so even if you are behind on your current payments, it is possible you can qualify. They can also be used to purchase a home. (see articles I have been featured in) You also continue to hold the title, so you continue to be the Owner of the home.
Reverse Mortgages are non-recourse loans. This means that if, when the home is sold, it is worth less that you owe you are not held responsible for the difference. You will not have to repay more than the value of your home.
2. How do I know if my home qualifies for a Reverse Mortgage?
Single Family, detached homes, townhouse, and multi-family properties that are owner occupied all qualify for a Reverse Mortgage. Condo’s that are FHA approved are also eligible . Contact us for condo’s that are not or if you are not sure. You may still qualify.
3. Why shouldn’t I just get a Home Equity Line of Credit or a 2nd Mortgage?
One of the Reasons that Reverse Mortgages are soo popular is that the cash you receive does not need to be repaid as long as you reside in the home. With a “Conventional” mortgage, you must have enough income to qualify for the loan, and they require you to pay a monthly payment. With Reverse Mortgages, you make no monthly payments and you are protected from foreclosure!
4. What if I outlive the loan?
If you or your spouse continue to live in the home and pay the taxes and insurance, you will not have to repay the loan.
5. Does my House have to be paid off?
No, you can still have a mortgage on your home.
6. Am I going to be taxed on the income from my Reverse Mortgage?
No, the money you receive from your reverse mortgage is tax free. You do have to continue to pay your property taxes, homeowners insurance and other related expenses.
7. How Much Will I receive from a Reverse Mortgage?
The amount of money you receive from a Reverse Mortgage is based on your age, how much your home is worth or the FHA mortgage limits in your area, what you currently owe on the home (if you have a current mortgage) and the current interest rates. For example a younger person with a home that is worth the same as an older person will be eligible for a lesser amount. Give us a call at 530-953-8555 for more information.
8. How do I receive the money?
Reverse Mortgages can be paid the following ways:
- Term: These are equal monthly payments for a fixed period of months decided by the borrower
- Tenure: These are equal monthly payments
- Line of Credit: Payments are made as decided by the borrower
- Modified Tenure: A combination of monthly payments and a Line of Credit
- Modified Term: A combination of fixed period monthly payments with a Line of Credit
9. How will a Reverse Mortgage effect my Estate?
When the last surviving borrower dies, sells the home or no longer lives in the home, you or your estate is responsible for repayment of the loan. Any remaining equity belongs to either you or your heirs.
10. A friend told me to use an Estate Planning Service, should I?
HUD acutually advises against estate planning services. HUD provides Reverse Mortgage counseling for free, its actually a requirement of the loan. To find a HUD approved counseling agency nearest you call 1-800-569-4287.
