Reverse Mortgage Education

In short, it is a loan that allows seniors (age 62+) to access their primary home’s equity.

The loan is paid back when the home is sold or vacated for 12 consecutive months by all parties.

You own the home, not the bank. Only you are on title. The bank can never remove you from your home as long as you continue to pay your real estate taxes and homeowners insurance. 

Any time you wish. There are no prepayment penalties or special fees. This loan works like any other loan, the lender is paid what is owed, the difference less normal closing costs are paid to you or your heirs.  If there is a shortfall in funds, the FHA mortgage insurance covers this.

The FHA insurance you’ve accrued throughout the loan covers this shortfall for you or your heirs. This is one of the biggest benefits of this program. 

If you pass and your home is slated to go to your heirs, they have the first right to the home. Assuming there is equity in it, they can refinance it to a regular loan and keep it or sell it and be paid any remaining equity in the home.

No. Another benefit of the reverse mortgage is you can live in your home as long as you pay your taxes & insurance and any applicable dues for your home. The market value, nor your age has any bearing on the benefits the borrowers receive. This is the peace of mind most seniors want and why so many educated seniors are opting for this program.

As stated above, after you pass your heirs will have a choice, to refinance the house or sell the home. If there is not enough equity in the home, then most likely they will sell it. Any shortfall is covered by FHA mortgage insurance which protects your heirs. In most cases a deed in lieu will be used. After all, if there is no equity or negative equity your heirs most likely won’t want the home.

If you pay your real estate taxes, insurance, and applicable homeowners or association dues, the bank will not foreclose on you.  Any loan with delinquent taxes is subject to county or lender intervention. It is not specific to this loan.  The lender does require borrowers to keep their home in good repair.  Most seniors do this as a matter of course, but we don’t want to leave anything out here.

No. This is a huge benefit for long-term peace of mind as your credit line increases each year you don’t access it providing extra available cash.

If you have an existing mortgage on your primary residence and you have enough equity, a reverse mortgage can replace your existing mortgage.  The monthly principal and interest payments you were making cease, thus creating additional cash flow.

There are many options but all hinge on your equity position, program choice, and age. Examples are a lump sum of cash at closing. A line of credit, monthly payments for life or monthly payments for a designated period.

It’s your money – so anything you want. For example, you can write a check to finance an RV, auto, home renovations, debt consolidation, or healthcare-related expenses.

We are not allowed to give tax advice but, since it is your money, the answer is always, no. We suggest you ask your tax provider.

If married only one spouse needs to be 62 or above. You’ll need a decent equity position (this varies by age), so we have to handle this on a case by case basis. The home should be a single family home, villa, multi-family home or town home.  Condos that are FHA approved may also qualify.  At this time, most condos are not FHA approved.

Generally, no. If you get Supplemental Social Security or Medicaid, we should discuss that.

The interest will compound on the outstanding balance of the loan. This occurs monthly

Assuming you have a credit line it grows at the same rate as your loan. Example: If you had a loan of $100,000 the outstanding balance would grow to approximately $105,850 after one year.  If you had a line of credit for $100,000, that would also grow to approximately $105,850, basically giving you an additional $5,850 of accessible funds. When unused, the credit line compounds just like the loan balance so it can grow very high providing a large safety net for unforeseen expenses. (Calculations were done using a fixed 5% rate + .5% annual mortgage insurance premium and are for example purposes only.)

Closing costs are higher because of the long-term security this loan provides. The FHA insurance cost is the primary cost driver which is the lender’s protection against market declines and you living until way past your normal life expectancy. This is why you can live as long as you want in the home and never worry about any market declines.

Assuming both spouses are on the loan (which is normal protocol) nothing changes. Any income you receive continues and there are no changes to any aspect of the loan.

Yes. We have a page specific to that. Click here.

Yes. We have a page specific to that. Click here.