Financing Fees

You can use the money you get from a Reverse Mortgage to pay the various fees that are charged on the loan. This is called "financing" the loan costs. The costs are added to your loan balance, and you pay them back plus interest when the loan is over.

Loan Amounts

The amount of money you can get depends on the specific Reverse Mortgage program you select. It also depends on the kind of cash advances you choose.

Debt Payoff

Reverse Mortgages generally must be "first" mortgages, that is, they must be the primary debt against your home. So if you now owe any money on your property, you generally must either: pay off the old debt with the money you get from a Reverse Mortgage, or pay off the old debt before you get a Reverse Mortgage. Most Reverse Mortgage borrowers pay off any home debt with a lump sum advance from their Reverse Mortgage.

Credit cards, car payments and other debts are not required to be paid off.

Debt Limit

The debt you owe on a Reverse Mortgage equals all the loan advances you receive (including any you used to finance the loan or to pay off prior debt), plus all the interest that is added to your loan balance. If that amount is less than your home is worth when you pay back the loan, then you (or your estate) keep whatever amount is left over.

With a government insured HECM loan you can never owe more than what your home is worth at the time the loan is repaid. The lender may not seek repayment from your income, your other assets, or from your heirs. (The technical term for this cap on your debt is a "non-recourse limit." It means that the lender does not have legal recourse to anything other than your home's value when seeking repayment of the loan.)

Repayment

All Reverse Mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home. (Typically, a "permanent move" means that neither you nor any other co-borrower has lived in your home for one continuous year.)

Reverse Mortgage lenders can also require repayment at any time if you:

• Fail to pay your property taxes
• Fail to keep your home insured; or
• Fail to maintain and repair your home.

These are fairly standard "conditions of default" on any mortgage. On a Reverse Mortgage, however, lenders generally have the option to pay for these expenses by reducing your loan advances and using the difference to pay these obligations. This is only an option, however, if you have not already used up all your available loan funds.

Cancellation

After closing a Reverse Mortgage, you have three (3) days to reconsider your decision. If for any reason you decide you do not want the loan, you can cancel it. But you must do this within three business days after closing. "Business days" include Saturdays, but not Sundays or legal public holidays.

If you decide to cancel, you must do it in writing, using the form provided by the lender, or by letter, fax, or telegram. It must be hand delivered, mailed or faxed before midnight of the third business day. You cannot cancel by telephone or in person. It must be written.

7 Things to look for when considering a Reverse Mortgage

1. No Application Fees: You should not be charged a fee when applying for a Reverse Mortgage.
2. Obligation: You are under no obligation to proceed with the application.
3. Counselors Are Required: However, your lender or broker should never require you to use theirs.
4. Good Faith Estimate: All lenders and brokers must provide a Good Faith Estimate.
5. Copy Documents: Always get copies of all documents you sign.
6. Appraisal: You are allowed to receive a copy of your appraisal report.
7. Cancelation: You have 3 business days (including Saturday) to cancel.

There are several factors that are considered when determining the amount you are eligible to borrow:

Home Value – By entering an amount of what you think your home is worth helps the Lender or Broker in providing an estimate only. An FHA appraisal of your home’s value is necessary before an accurate amount can be determined. Should you decide to proceed with a Reverse Mortgage an FHA appraisal will need to be ordered.

Age – The older you are, the more you are eligible to borrow. To be eligible for a reverse mortgage either you or your spouse must be at least 62 years of age. You may start the process 90 days prior to your 62nd Birthday but it cannot close before that date.

Interest Rate – The current interest rate plays a major role in the FHA’s formula for determining how much you are eligible to borrow. If rates rise in the future, the proceeds available could be reduced.

Reverse Mortgage Cons

With every positive there is a negative and since we aim to provide all the facts regarding Reverse Mortgages it is only right that we inform you of what some consider to be the down side of this type of mortgage.

I. Typically the fees for Reverse Mortgages are the same as traditional FHA mortgages but generally are higher than conventional mortgages. The largest costs are:

i.  FHA mortgage insurance
ii. Origination fees

II. Loan balances grow over time meaning the value of the estate, or inheritance, may decrease.

III. While there are no adverse effects on Social Security or Medicare, if you are on government assistance such as Medicaid or other need-based programs it can affect those programs if too much money is withdrawn, and not spent, in one month.

IV. There has been a negative stigma surrounding Reverse Mortgages due to poor policies when the program was first created back in 1961. As a result of this it remains one of the most misunderstood and misrepresented mortgages offered today. The primary reason Reverse Mortgage counseling is required as part of the process is because most individuals still don’t fully understand how they work.

There are numerous options available for Reverse Mortgage barrowers today. Only a licensed Lender or Mortgage Broker can generate an estimate of the available Reverse Mortgage proceeds. Enjoying Aging is not licensed to provide such information. By submitting this form you are authorizing Enjoying Aging to pass your information to a licensed Lender or Broker that can provide you with a professional quote. If you should have any questions they will be happy to provide the answers.

This information does not come from an approved HUD or FHA government agency. For the most accurate information please submit the form below so a licensed Lender or Reverse Mortgage Broker can contact you. A Reverse Mortgage Consultant will work with you and your advisors to help you assess your individual situation and choose the product that best meets your needs.

The information you provide by submitting this form is only shared with a qualified professional and never sold or used for data farming. By submitting this form you are NOT applying for a loan and are under no obligation to proceed with a loan.