What is a Reverse Mortgage

Reverse mortgage can be a valuable retirement planning tool that can greatly increase retirees income streams by using their largest assets: their homes. A reverse mortgage allows homeowners to borrow against their home’s equity, while still maintaining ownership of the home.

The best part about a reverse mortgage is that unlike conventional mortgages, there are no payments involved. Instead, the lender makes payments to the borrower either through a lump sum, monthly payments, or a line of credit.

The reverse mortgage is repaid when the borrower dies, permanently moves from the residence, or the property is sold. Instead of you paying the bank monthly and the equity in your home growing, the bank pays you monthly, and the equity may shrink. It is important to know that you must be 62 in order to qualify.

The benefit of a reverse mortgage

A reverse mortgage can be a powerful source of funding for individuals who need to increase their income to be comfortable in retirement. The largest personal asset most retirees possess is their home. In many cases, a retiree’s home is paid off. A reverse mortgage increases income without increasing monthly payments and allows a retiree to stay in his or her home. If you are at least 62 and considering a reverse mortgage, the amount you will be eligible for is based on several things, most importantly, the value of your home, your age, and interest rates. You will be eligible for more money the older you are, the more your home is worth, and the lower current interest rates are.

Potential issue to be aware of is the requirement to pay back the loan if you should permanently move out of the home. This may not sound like a problem now, but if you ever need to enter a full-time care facility, the loan would become due if you left your home for a year or more. The other downside to the reverse mortgage affects your estate. The reverse mortgage will almost always decrease the equity in your home, which will leave less money to your heirs however there are ways to protect the equity and the heir’s interests on the property for further info please contact us directly and or complete the application online:
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A reverse mortgage, the most popular form being the “Home Equity Conversion Mortgage” (HECM), is a mortgage that allows seniors (aged 62 years and above) to access and borrow against the equity in their home without having to sell it, give up the title, or incur a monthly mortgage payment. While such funds can be used for any purpose, repayment is required only if the borrower dies, sells the home, or no longer occupies the home as the primary residence. The proceeds of the reverse mortgage depend upon the age of the youngest borrower, the current interest rate, lower of the appraised value or purchase price of the home, and the maximum mortgage limit. While the traditional HECM program offered financing on existing primary residence, Congress has, over the recent years, expanded the program to allow for the purchase of a home. Reverse mortgages have become increasingly popular with seniors who have equity in their homes and are seeking to supplement their incoming.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/oe/rpts/hecm/hecmmenu

Steps in the Reverse Mortgage Lending Process

Application

For the application you will need to provide the following information required by the lender:

  • A photo ID,
  • Verification of your Social Security number,
  •  A copy of the deed to your home,
  • Information on any existing debt (liens) on your home, and your counseling certificate.
  • Normally you need to pay for loan application fee, which covers the cost of a home appraisal and a minimal credit check.

Prior to taking the application however you need to attend the Reverse Mortgage Education provided by a HUD approved organization. To find the nearest HUD educator organization to visit the HUD website: https://entp.hud.gov/idapp/html/hecm_agency_look.cfm

Processing

The lender orders an appraisal, title search and insurance, lien payoffs, and any other services needed to complete the loan. An appraiser comes to your home to assess its value and physical condition. If the appraiser finds structural defects that require repair, you must hire a contractor to make the repairs before you can qualify for the loan.

The lender submits all required information to the lender’s underwriting department, which determines if everything needed to close the loan is correctly completed.

Closing

When your loan is approved by the underwriting department, a date for closing the loan is set, and the final loan documents are prepared. A closing is a meeting where you sign all the loan documents. It is generally handled by the title company.

After closing, you have 3 business days in which to cancel the loan. When this three-day period is over, loan funds can be paid to you, and can be used to pay off any existing debt on your home. A new lien is placed on your home to secure the reverse mortgage.

After Closing

Unless you have arranged to have your taxes and homeowner insurance paid directly from your loan proceeds, you are still responsible for making these payments. If you do not, the lender can use loan proceeds to make the payments or, if none remain, the lender can make the entire loan due and payable.

The loan servicer sends you your loan advances and periodic loan statements. No repayment is due until the death or permanent move from the home by the last living borrower, the sale of the home, or anything else that results in the home no longer being the principal residence of at least one borrower. The repayment obligation cannot be greater than the home’s value at the time the loan is repaid.