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 Questions
& Answers |
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1.
What is a reverse mortgage?
A
reverse mortgage enables older homeowners (62+) to convert
part of the equity in their homes into tax-free income
without having to sell the home, give up title, or take
on a new monthly mortgage payment. The reverse mortgage
is aptly named because the payment stream is “reversed.”
Instead of making monthly payments to a lender, as with
a regular mortgage, a lender makes payments to you. Below
are some common questions asked by consumers about reverse
mortgages.
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2.
Who is the right candidate?
Eligible property types include
single-family homes, 2-4 unit properties, manufactured
homes (built after June 1976), condominiums, and townhouses.
In general, cooperative housing is ineligible. However,
some lenders have developed private programs that lend
on co-ops in New York. |
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3.
What types are there & how do they work?
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. Or to be a homeowner with equity
in your home. You may qualify even if you have an outstanding
balance on your first mortgage. Single-family homes and
qualified condominiums, townhouses, manufactured homes,
and 1- to 4-family owneroccupied residences are eligible.
Reverse mortgages are available only for homes occupied
by owners as a principal residence. |
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4.
What is the impact of a reverse mortgage on homeownership?
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. |
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5.
How to finance your Dream Retirement Home
One of our greatest fears, as we
all grow older, is the prospect that one day we may have
to leave our home. We fear leaving not only the source
of our memories and comfort but our sense of control.
Our home is our security. In our home we decide what and
when to eat, the time we go to bed, and who
visits. The control we wield in our home is the source
of our independence, dignity and quality of life.
But remaining in our homes is not without certain challenges.
Homes that were convenient when we were younger can cause
problems in later years. As our lifestyles and needs change,
so should our home environments. Fortunately, thoughtful
renovations and a variety of products consistent with
the
principals of Universal Design can make Aging In Place
a reality. In other words, your dream retirement home
may be right beneath your feet.
The National Reverse Mortgage Lenders Association, in
partnership with the National Advisory Council for Aging
In Place, has created this information booklet on design
ideas, useful products and how to find them, and professionals
who can help plan and implement home modifications. |
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6.
What are the most common uses of the proceeds of a Reverse
Mortgage?
The proceeds from a reverse mortgage
can be used for anything, whether its to supplement retirement
income to cover daily living expenses, repair or modify
your home (i.e., widening halls or installing a ramp),
pay for health care, pay off existing debts, buy a new
car or take a "dream" vacation, cover property
taxes, and prevent foreclosure. |
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7.
What's the difference between a reverse mortgage and a
bank home equity loan?
With a traditional second mortgage,
or a home equity line of credit, you must have sufficient
income versus debt ratio to qualify for the loan, and
you are required to make monthly mortgage payments. The
reverse mortgage is different in that it pays you, and
is available regardless of your current income. The amount
you can borrow depends on your age, the current interest
rate, other loan fees, and the appraised value of your
home or FHA's mortgage limits for your area, whichever
is less. Generally, the more valuable your home is,
the older you are, the lower the interest, the more you
can borrow. You don't make payments, because the loan
is not due as long as the house is your principal residence.
Like all homeowners, you still are required to pay your
real estate taxes and other conventional payments like
utilities, but with an FHA-insured HUD Reverse Mortgage,
you cannot be foreclosed or forced to vacate your house
because you "missed your mortgage payment."
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8.
Can the lender take my home away if I outlive the loan?
No! Nor is the loan due. You do
not need to repay the loan as long as you or one of the
borrowers continues to live in the house and keeps the
taxes and insurance current. You can never owe more than
your home's value. |
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9.
How much money can I get with a reverse mortgage?
The amount you can borrow depends
on your age, the current interest rate, other loan fees
and the appraised value of your home or FHA's mortgage
limits for your area, whichever is less. Generally, the
more valuable your home is, the older you are, the lower
the interest, the more you can borrow. |
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10.
How do I receive my payments?
You have five options:
Tenure
- equal monthly payments as long as at
least one borrower
lives and continues to occupy the property as a principal
residence.
Term
- equal monthly payments for a fixed period of months
selected.
Line
of Credit - unscheduled payments or in
installments, at times and
in the amounts of your choosing until the line of credit
is exhausted.
Modified
Tenure - combination of line of credit
with monthly payments
for as long as one borrower remains in the home.
Modified
Term - combination of line of cash, a
line of credit and
monthly payments for a fixed period of months. You select
the
amounts. |
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