An informed consumer is our best client. We want you to know all about a reverse mortgage before proceeding. Below are the top 10 questions we receive from our 62 and older homeowners.
- What is a reverse mortgage?A reverse mortgage is a special type of home loan that allows a homeowner 62 or older to convert a portion of the equity in his or her home into cash. The equity you have built up over years of home mortgage payments can be paid to you. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.
- Can I qualify for a HUD reverse mortgage?To be eligible for a HUD endorsed reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and you must live in the home as your primary residence.
You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. Our reverse mortgage advisor can provide you a list of at least 10 HUD agencies.
- Can I apply if I didn’t buy my present house with FHA mortgage insurance?Yes. It doesn’t matter if you didn’t buy your home with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
- What types of homes are eligible?Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes, and some co-ops are eligible. Condominiums must be FHA-approved condo development.
- What’s the difference between a reverse mortgage and a bank home equity loan?With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify and you are required to make monthly mortgage payments.
The reverse mortgage is different in that you make no monthly payment out of pocket and there are no income requirements.
The amount you can qulaify to receive depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less.
Generally, the more valuable your home is, the older you are, and the less you owe, then the more money you qualify to receive.
You don’t make payments, because the loan is not due as long as the house is your principal residence.
Like all homeowners, you still are required to pay your real estate taxes, homeowners insurance and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”
- Can the lender take my home away if I outlive the loan?No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and homeowners insurance current. You can never owe more than your home’s value, which is the primary benefits you receive with the FHA guarantee.
- Will I still have an estate that I can leave to my heirs?When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs. This featured is the protection you purchase with the FHA MIP insurance.
- How much money can I get from my home?The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home, the older you are the more you qualify to receive.
- Should I use an estate planning service to find a reverse mortgage? I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan?
We do NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! However, we encourage financial planners, accounts and other professionals who represent their clients, to be present during our appointment and act as the advocate for their client.
- How do I receive my payments?
You have five options:
- Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term – equal monthly payments for a fixed period of months selected.
- Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
- Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
- Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.We understand you may have other questions and concerns. To assist you with any other questions, please use our contact form to the right or give us a call, toll free 877-266-9500 or locally 302-266-9500.
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