Reverse Mortgage Frequently Asked Questions
(Jumbo Reverse Mortgage FAQ at lower portion of page)
FAQs | Info | Loan Process | Counseling | Glossary | HECM ‘At-A-Glance’
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What is a Reverse Mortgage?
A Reverse Mortgage loan for seniors is a home equity loan that does not require monthly mortgage payments. Only one payment due when the homeowner(s) no longer occupy the home. HECM Reverse Mortgages are backed by the U.S Government.
What are the Qualifications to obtain a Reverse Mortgage?
A reverse mortgage is easy to obtain, provided that:
- You are at least 62 years of age or older. Younger spouses under the age of 62 will be considered a non-borrowing spouse.
- Your home is occupied as your primary residence.
- You have enough equity in your home.
- You meet the financial assessment qualifications.
What are the Benefits of Reverse Mortgages?
You can use the money you receive from your reverse mortgage in any way you choose:
- Supplement your income
- Home improvements
- Pay off a current mortgage – No More Payments!!!
- Medical expenses
- Pay off debt
- Buy a new car
- Travel
- College tuition or gifts to family
- Create an increasing line of credit for a nice nestegg
- Take advantage of tax-free funds
How much money is available from the reverse mortgage?
The amount of money you can receive from a reverse mortgage loan is determined by your home value, the age of the youngest homeowner and the current interest rate. We will assist you in evaluating your options and calculate the maximum amount of money that will be available to you.
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How can funds be received through the reverse mortgage?
With a reverse mortgage, you have five payment plan options to choose from:
- Tenure Option: Receive equal monthly payments for as long as you occupy your home as your principal residence.
- Line of Credit: Draw cash from your reverse mortgage at any time up to the available limit. Interest is only charged after money is accessed. The available line of credit increases at the same interest rate that’s charged on your loan balance.
- Lump Sum Cash Advance: You can receive all or part of your money in a lump sum upon the closing of your reverse mortgage.
- Modified Tenure: Set aside a portion of the loan proceeds as a line of credit, in addition to monthly payments.
- Term: Receive equal monthly payments for a fixed period of time that you select, for example 5 or 10 years.
The payment plan can be changed for a small fee.
What are the interest rate options for reverse mortgages?
The interest options on a reverse mortgage include adjustable and fixed rates. The adjustable rates are tied to the one year and one month LIBOR indexes plus a margin. Interest and ongoing mortgage insurance (MIP) is charged on your loan balance and added to the balance with a compounding affect. If you select a line of credit, interest is not charged until the money is drawn from the account.
The annual adjusting rate option has a 2 point annual cap and 5 point lifetime cap above the start rate. The monthly adjusting rate option has a 10 point lifetime cap and no annual cap.
What are the closing costs at the time the Reverse Mortgage is originated?
HUD charges a Mortgage Insurance Premium equal to 2% of the value or maximum claim amount (up to $679,650). Ongoing mortgage insurance is .5% of the loan balance. The outside closing costs and origination fee varies depending on the home value, location & program selected. Outside closing costs include appraisal, title insurance, escrow, recording fees and others. We will be happy to provide you with an estimate of the detailed costs.
When does the Reverse Mortgage loan balance need to be repaid?
The reverse mortgage becomes due and payable when you or your spouse permanently leave the home – move, sell or pass away. Reverse mortgages are typically repaid from the proceeds of the sale of the home, with any remaining equity staying with the homeowner or their heirs. If a spouse passes away, the surviving borrowing spouse continues to receive the full benefits of the reverse mortgage, with no repayment until they decide to permanently leave the home. If the surviving spouse is a non-borrowing spouse, he or she will not have access to any funds in the loan. He or she will need to get on title within 90 days of death of the spouse and continue to pay all property charges.
Do I still own my home when I get a reverse mortgage?
Yes, you retain full ownership of your home when you obtain a reverse mortgage. As with any mortgage, the lender has a lien against your property. Since you make no monthly payments the loan balance increases over time. When the loan is repaid the borrower or their heirs pay off the loan balance, which consists of the financed closing costs, the cash advanced from the reverse mortgage and the interest and mortgage insurance that has accrued. You benefit from the appreciation and the remaining equity stays with you or your heirs.
What is reverse mortgage counseling and how do I get a certificate?
To qualify for the Reverse Mortgage you are required to talk with an
independent reverse mortgage counselor who provides a certificate of counseling that must be presented to the originator. This counseling session will help you determine whether a reverse mortgage is right for you. The counseling session can be done either in person or on the telephone, and family or trusted friends are encouraged to participate. Click here to go to counseling page
HomeSafe Jumbo Reverse Mortgage – Frequently Asked Questions
Who is eligible for HomeSafe?
Borrowers must be age 62 or older and pass the financial assessment.
Is the HomeSafe product available for all situations?
HomeSafe is only available when a borrower has requested loan proceeds is excess of the HECM limit, or when borrower does not qualify for the HECM but does qualify for the HomeSafe.
What types of property are eligible for HomeSafe?
New or existing single-family residences or condominiums (condos must be valued at a minimum of $500,000 and meet spot condo requirements).
What is the current interest rate on HomeSafe?
There are four fixed rate options with higher principal limits available on higher interest rates. Call for current rates.
What type of counseling is required with HomeSafe?
There is specific HomeSafe counseling required.
How will appraisals be handled with HomeSafe?
The initial appraisal must be ordered through a national AMC, Mortgage Information Services. Transferred appraisals are not acceptable. Properties valued at $1.5 million or more require a second appraisal and the lower of the two reports determines value. The borrower does not have to pay for the second appraisal.
What is the adjusted value, and are there any limits to value calculation?
The maximum loan amount or principal limit is $4,000,000.
What criteria are used to determine the final loan amount?
The LTV is based on the age of the youngest borrower, property type, reduced ltv determination (if applicable) and the lowest of the appraised value, sales price, or adjusted value.
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