Generally speaking, borrowers qualify for approximately 50% of their home’s value. There are several contributing factors which effect the actual amount that you may qualify to receive. These things include for example: the type of reverse mortgage, your age, mortgage payoffs, and of course your home value. With changing interest rates and frequent modifications to the program, it’s best to call for a more accurate estimate.
Not necessarily. Outside of the FHA insurance premium, the reverse mortgage has all the same costs of a conventional mortgage. Most of closing costs and fees can be financed into the reverse mortgage loan. In comparison to selling your home and moving, a reverse mortgage loan may provide a much more cost-efficient option by allowing the homeowner to access a portion of their home equity.
The loan becomes due when all the homeowners have passed away or have permanently moved out of the property. It is required that the taxes and insurance are paid, and the home is maintained according to Federal Housing Administration (FHA) standards.
The reverse mortgage loan agreement has no required monthly payments. There would be no future monthly mortgage payments because any existing mortgage would be paid off at closing using the proceeds from the reverse mortgage loan.
No. The funds can be used without restriction. However, there is one exception. The borrower may be required to set aside additional funds from the loan proceeds to pay for taxes and insurance.
No, banks and other lenders are interested in originating loans and earning interest. Rather than owning the home, the bank or lender adds a lien in the form of a reverse mortgage loan onto the title, so they can eventually collect the amount loaned plus interest.
The estate does inherit the home, but there will be a lien on the title. If your heirs wish to retain the property, then the full amount of the loan must be paid regardless of property value. The amount due at loan maturity is the principal borrowed plus any accrued interest and mortgage insurance premium.
For example, if someone with a $250,000 home passes away and leaves a reverse mortgage loan balance of $80,000, then the estate could sell the home for $250,000, repay $80,000 to the bank, and keep the $170,000 balance.
As a non-recourse loan, lenders can only look to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value. You or your heirs will not be required to pay more than the value of your home at the time the loan is repaid; even if your loan balance exceeds the value of your home provided you or your heirs decide to sell the home.
The FHA reverse mortgage loan exists to help the homeowner to stay in their home. The homeowner cannot be forced out of their home unless they break the terms of the loan agreement. Most of the reverse mortgage foreclosures have taken place because the homeowner failed to pay their property taxes. If the property taxes don’t get paid, regardless if you have a reverse mortgage or not, the homeowner can be forced out of their home. The homeowner must also reside in the home as their primary residence, pay their property and homeowners insurance and maintain the home according to FHA guidelines. In the event the borrower does not adhere to these responsibilities, HUD guidelines may require the servicer to initiate foreclosure proceedings.
Entitlement programs like Social Security and Medicare typically are not affected. However, need-based programs like Medicaid can be affected. You should consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
Loan proceeds are not considered income and are not taxable; however, you must continue to pay property taxes. Consult a tax advisor for more information.
♦ A home equity loan and a reverse mortgage loan both use the home’s equity as collateral.
♦ Any homeowner can apply for a home equity loan. A homeowner must be at least 62 years old to apply for a reverse mortgage loan.
♦ A home equity loan typically must be repaid over 5 or 10 years. A reverse mortgage loan is generally not repaid until the homeowner passes away or permanently moves out of the home for 12 consecutive months.
♦ Reverse mortgage loan interest rates are comparable to home equity loan rates.
♦ Although reverse mortgage closing costs are generally higher than a home equity loan, typically the closing costs can be financed as part of the reverse mortgage loan.