Reverse Mortgages

                        

Frequently Asked Questions

 

Am I eligible for a reverse mortgage?

To qualify for a reverse mortgage, you must:

*     Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if their names appear on the title to the

      home.

*    Own as your primary residence a single-family home, qualified condominium, townhouse, manufactured home, or

      1- to 4-family owner-occupied property. Co-ops will soon be eligible.

 

How much money can I get?

This depends on a few factors, including your age, the value of your home, the amount of built-up home equity, and interest rates at the time of origination. Other factors are the type of reverse mortgage product and particular payment option you select. Call us to get a quick estimate on how much you could receive under different products and payment options. Typically a home owner will get from 50% - 70% of the value of their home.

 

What are my payment options?

    You decide how to receive the money generated by a reverse mortgage. Your payment options are:

          1. An upfront lump sum payment;

                 2.   Line of credit;

                 3.  Fixed monthly payments for as long as you remain in your home (or a predetermined, shorter period);

             4.  A combination of monthly income and line of credit.

 

How much does a reverse mortgage cost? What are the upfront and closing fees?

Many of the same costs associated with a regular mortgage apply to reverse mortgages. You will be charged an origination

fee, a mortgage insurance premium (for FHA Home Equity Conversion Mortgages), an appraisal fee, and certain other

standard closing costs. In most cases these fees and costs are capped and may be financed as part of the reverse mortgage,

so that you incur little out-of-pocket expense.

 

Do I need to get an appraisal of my home to get a reverse mortgage?

Yes. Since the value of your home is a factor that determines how much money you can get from a reverse mortgage, an

appraisal is required. Normally the lender will order the appraisal, which is paid for by the borrower at the time of

application.

 

Do I need a lawyer to apply for a reverse mortgage?

Legal counsel is not required. However, we encourage you to seek the advice of a legal, tax, or financial advisor before committing to a reverse mortgage.

 

** Consumer Safeguards  **

n Advance counseling by an independent counselor whose job is to review the transaction, answer any questions you may have about reverse mortgages and suggest alternative options.

n Limits on the interest rate and origination fee.

n A ceiling on the repayment YOU owe—it can never exceed the value of the home, when the property is sold to pay back the reverse mortgage.

n Advance disclosure so that you are made fully aware of the cost incurred in obtaining a reverse mortgage.

 

Am I required to receive counseling before I get a reverse mortgage?

Yes. Counseling is a very important consumer protection required by law for the government program and best practice

by private lenders who have created their own programs.  You can seek face-to-face counseling from a local HUD

approved counseling agency, or by telephone from a national counseling agency, such as AARP (800-209-8085),

National Foundation for Credit Counseling (866-698-6322).  You can request a list of counselors from your lender.

 

Are reverse mortgage proceeds taxable income, and can they affect my Social Security or government benefits?

Funds from a reverse mortgage are tax-free; it’s your money, not additional income. A reverse mortgage does not affect

Medicare or Social Security, but can impact eligibility for Medicaid and Supplemental Security Income (SSI). If you

receive a lump sum payment from a reverse mortgage, any amount retained the month after you get it would count as a

resource and could affect SSI or Medicaid coverage. To be safe, consult a tax advisor or benefits expert.

 

Under What Circumstances Should I Not Consider a Reverse Mortgage?

Like any product, a reverse mortgage is not appropriate for everyone. There may be other less expensive options to

consider.  If you have sufficient income, then a home equity loan or line of credit may be something to consider. If you

need to make home repairs, your city or county government may offer special grants or low-interest financing. If you're

having problems paying property taxes, check whether a tax deferral program is offered.  Also, if you want to leave your

home to your children, then you should consider other options, because in many cases, the home is sold to pay back a

reverse mortgage.

 

Who owns title to my home while my reverse mortgage is outstanding – the bank or me?

You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home

purchase mortgage.

 

Am I required to pay anything during the course of the reverse mortgage loan?

No. The flow of payments is reversed during the term of the reverse mortgage – the lender pays you. However, you are

responsible for keeping up payments on your homeowner’s insurance and property taxes, and to maintain the

condition of your home.

 

Are there any limits on how I can use the funds from a reverse mortgage?

No. Borrowers have used reverse mortgages for a variety of purposes, such as paying health care expenses, supplementing

retirement income, financing home repairs or modifications, or visiting friends and family. Some have used a reverse

mortgage to purchase recreational vehicles, start a small business, and travel. Others have used reverse mortgages to

eliminate expenses by paying off mortgages and credit card debt. Please consider your financial goals and objectives.

 

What is the interest rate on a reverse mortgage and how is it determined?

With a reverse mortgage, you are charged interest only on the proceeds that you receive. Interest rates are generally

calculated from one of two indexes, either the U.S. Treasury Constant Maturity Rate or the London Interbank Offered

Rate (LIBOR) depending on the consumer’s preference, and priced at a set margin above the index. Historically, interest

rates were variable only, but now fixed rate loans are becoming available. On variable rate loans, there are caps on interest

rate increases. Interest is not paid out of your available loan proceeds, but instead compounds over the life of the loan until

repayment occurs.

 

How much will be owed when my reverse mortgage comes due?

What must be paid at the conclusion of the reverse mortgage is the sum of the actual funds received or advanced for fees,

plus the accrued interest.  In no event will the repayment amount exceed the value of the home, as long as the property is

sold to pay back the reverse mortgage. If a decision is made to keep the home, then the pay-off amount would equal the

total balance on the account.

 

What happens if I move out of my house after I get a reverse mortgage?

You may live outside your home for up to 12 consecutive months before the loan must be repaid.  In general, a reverse

mortgage comes due when the borrower dies, permanently moves out, or sells the home.

 

What happens when my house gets passed to my heirs?

Once your home passes to your heirs, the reverse mortgage comes due. Your heirs may either pay the balance due on the

reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the

home, they get to keep any excess sales proceeds.  However, if your heirs choose to keep the home, and pay back the loan

using private funds, they will be responsible for paying the full balance, regardless of whether that amount exceeds the

home’s value.

And most important –

 

Where can I get a reverse mortgage?

Reverse mortgages are offered mostly by private, specialized lenders.  Call us at 956-361-9941 no obligation consultation and quote.  At TrueCompass Lending Corporation we will always treat you fair and never pressure you.

 

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