1. What is a reverse mortgage?
2. Will I lose my house?
3. Will there be anything for my heirs to inherit?
4. What if my house is in a trust?
5. Can a reverse mortgage be obtained using a Conservatorship or Power of Attorney?
6. What documents do I need to complete the application?
7. What if my house needs repairs?
8. How much money will I receive?
9. How can I receive the proceeds from my reverse mortgage?
10. What is "credit line growth"?
11. Must my house be sold after I pass away?
Q. What is a reverse
mortgage?
A. A reverse mortgage is a loan for people who are 62 or older that
allows them to pull the equity from their home. You can use the funds to
pay off your mortgage, create a line of credit, have monthly income for life or
any combination thereof, and there are no monthly mortgage payments. All
that is required is that you maintain the taxes and insurance on your property.
The loan is only due and payable once the last borrower no longer lives on the
property used for the reverse mortgage.
Q. Will I lose my house?
A. Absolutely not! You retain full title to your property and
can do with it as you choose.
Q. Will
there be anything for my heirs to inherit?
A. This varies with each individual situation. The varying
factors are: the value of your home, how much of your reverse mortgage was used,
did the housing market depreciate/appreciate and how old does the last borrower
live to. Please view some examples
that better illustrate retained equity.
Additionally, this is a non-recourse loan, which means at no point in time will your heirs or estate be left with debt. If at any point the loan is larger than the value of your home (which happens usually in cases where the market depreciates and the borrower lives longer than the life expectancy of the loan) than no more than the value of the home is paid back.
Q. What if my house
is in a trust?
A. This does not pose a problem so long as it is a living revocable
trust.
Q.
Can a reverse mortgage be obtained using a Conservatorship or Power of Attorney?
A. Yes, on both accounts. With the Conservatorship there
would need to be a court order giving the conservator the ability to encumber
the property with a reverse mortgage. Verbiage would include either
"reverse mortgage" and/or "adjustable rate, negative amortized loan".
Additionally, the court order must not include an interest rate or loan amount.
This is how most court orders are written wrong because the attorney or judge,
who does not understand reverse mortgages, tries to insert the interest rate or
loan amount, and both are not acceptable because of the variable nature of the
loan.
A Power of Attorney is acceptable if it is durable, if it gives the right to encumber the property, is revocable and is executed by a competent borrower.
If you are unsure how the POA or Conservatorship should be written please contact us or speak with your attorney.
Q. What
documents do I need to complete the application?
A. The following documents are needed to complete your application:
▪ Copy of driver's license or birth
certificate
▪ Copy of social security card or Medicare card
▪ Copy of utility bill or mortgage bill
▪ Copy of insurance policy
▪ Copy of trust, if applicable
▪ Copy of POA or Conservatorship, if applicable
Q. What if my house needs
repairs?
A. The only time repairs are required for HECM reverse mortgages are if the
appraiser notes his/her appraisal that an inspection is required or if the
underwriter sees something in the appraisal pictures that would require an
inspection. If either case is called for than a pest inspection is ordered
and any section one items, such as structural or safety issues, are required to
be repaired.
You can repair these before obtaining the reverse mortgage but the most common route is to create a repair rider and do the repairs after your reverse mortgage has closed. If a repair rider is put in place than the lender holds 150% of the repair bid(s) aside. When the repairs are completed a bill is submitted and the funds from the repair rider are released to pay for the repairs. Any excess funds held aside are returned to the borrower's account.
With the Cash Account a pest inspection is required and would follow the same steps as the HECM would if a pest inspection is called for.
Q. How much money will I
receive?
A. There are several variables that affect how much can be received.
The variables are your age, the current interest rate and the county that you
live in. The older you are the more that you would receive. Please
view some examples. For an estimate
please use our
calculator.
Q.
How can I
receive the proceeds from my reverse mortgage?
A. There are several ways that you can receive the funds from your
reverse mortgage. The most common method is to receive monthly income for
life. Other ways are to take a lump sum, open a line of credit, or any
combination thereof. Within the line of credit option there is a credit
line growth feature.
If, after you have closed escrow, you decide you would like a different payment plan, then the lender would charge a small fee, usually around $20-25, and you can choose any method of payment that you would like.
Q. What is "credit line growth"?
A. Credit line growth applies to those borrowers who would prefer to set up
the funds from their reverse mortgage as a line of credit. Any unused
portion of the line of credit will have a credit line growth that can be used at
a later date. For example, if your line of credit has a credit line growth
of 6% and your balance is $100,000, after a year your line of credit would have
a balance of $106,000. The $6,000 is not interest income, but rather an
amount that can be pulled from at a later date. Similar to refinancing
without having to refinance for the higher amount available.
Q. Must my house be
sold after I pass away?
A. No, your house does not have to be sold. However, the loan balance
still needs to be paid back, which is usually done by your heirs selling your
property. If your heirs would like to keep the property than they either
pay the balance of the loan off with their own funds or they can obtain a
"forward" loan or conventional mortgage.