Most but not all reverse mortgages are Home Equity Conversion Mortgages – HECMs, and are only available through an FHA-approved lender. This advertisement talks about HECM loans only.
When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?
You remain the owner of your property. There is no change to the deed or title of your home when completing a reverse mortgage.
What happens if you change your mind later and want to change your payment plan?
As long as you still have money available to borrow from your reverse mortgage, you can change your disbursement option for a small, one-time fee.
When you have a reverse mortgage, do you have to make a monthly mortgage payment to the bank?
No, but for tax or cash flow purposes, including Medicaid planning, you may wish to do so.* Remember, you are always required to pay home expenses, such as taxes and insurance, and maintain the home. *This is not tax or financial advice. Please consult your tax or financial advisor for your specific situation.
What primary responsibilities will you continue to have after you get a reverse mortgage?
The borrower remains responsible for the payment of home-related expenses, such as property taxes and homeowner insurance (and homeowner association dues, if applicable), as well as basic upkeep of the property. You must also live in the home as your primary residence.
When does the reverse mortgage have to be paid back?
Your reverse mortgage will become due when one of these things happen: 1. You sell your home. 2. You permanently move out of your home. 3. The last person on the title passes away. Your heirs will have two options. They can choose to sell the property, pay off the reverse mortgage balance and keep any remaining equity, or they can choose to keep the property by refinancing the balance of your reverse mortgage with a new mortgage in their name. 4. You fail to keep up with the loan terms. Remember, if the loan balance ever exceeds the home value, it does NOT trigger an early payoff or cause you to have to move out of your home.
If you took all of the money from the reverse mortgage in a lump sum and spent every bit of it, would you be able to go on living in your home?
Yes, your reverse mortgage will not become due until you pass away, sell your home, are no longer living in the home as your primary residence, or fail to comply with loan terms. If you use all of the available proceeds, you will not have any more money available, and interest will continue to accrue.
If you get a reverse mortgage, how does that change the amount of money that you will leave to your children (or other heirs)?
Most likely, it will decrease the amount of money the heirs will receive from the value of the home. However, your overall net worth has the potential to get better, depending on what you spend from your other investments/accounts. Because this is not financial advice, however, you should consult your financial advisor about how a reverse mortgage can work best for your specific situation.
Will your heirs receive more or less after you pass away than they would without a reverse mortgage?
It depends on what you do with your overall finances. Some families will receive more by being more efficient with the use of their portfolio of assets; however again, because this is not financial advice, it is essential that you consult with your financial advisor to make the best use of a reverse mortgage for your specific situation.
What if I live in Florida for half the year?
That’s fine; you just need to live in your primary residence for six months and a day.
What may happen if you do not keep up these responsibilities as a borrower?
If you do not keep up with these basic responsibilities, you will be subject to foreclosure as required by HUD (the U.S. Department of Housing and Urban Development) and the terms of your loan agreement.
What if I go into a nursing home?
As long as you are merely rehabilitating and getting better, your home and reverse mortgage are still yours until two doctors agree it is impossible for you to ever return to your home.
What happens if at any time the amount you owe under a reverse mortgage is greater than what your home is worth?
Nothing as long as you still live in your home and pay taxes and homeowners insurance and maintain the home.
If you refinance your current HECM, will you still have to pay mortgage insurance? How does this work?
In general, mortgage insurance is paid for with an upfront premium that is included with your closing costs and a monthly premium that is added to your loan balance each month. When you refinance a reverse mortgage, you will receive credit for the upfront premium you paid on the original loan; you would only have to pay mortgage insurance on the increased value of your home since you took out the original HECM.
What are some additional costs you will incur with a refinance?
Other than the reduced upfront mortgage insurance premium, closing costs associated with a HECM refinance are the same or lower as on your original loan. You may be charged an origination fee and all other third-party costs (appraisal, title insurance, etc).
QUESTIONS ABOUT HECMS FOR PURCHASE:
When you purchase a home with a HECM, will the HECM be held on your existing home or your newly purchased home?
The HECM will be held on the newly purchased home as your primary residence. The down payment you will need to bring to closing is usually between 30-70%.
How will the lender determine how much money you will need at closing?
The required down payment on your new home is determined on a number of factors, including your age or eligible non-borrowing spouse’s age, if applicable; current interest rates; and the lesser of the home’s appraised value or purchase price.
What sources of funds (money) are allowed when you purchase a home with a HECM?
The money must come from your liquid assets (bank accounts, CDs, retirement accounts, etc.) or from the documented sale of other assets you may have (your present home for example).
Why is my down payment higher with a reverse mortgage?
Your down payment is higher initially because you will not be required to make a mortgage payment (except for taxes and insurance, and the home must be maintained). With a traditional mortgage, you would potentially lose more in cash flow over the years because of the consistently required payments. Remember the HECM for Purchase also can allow you to purchase a more expensive home than what you would otherwise be willing to commit to in payments for the next 20-30 years.