Common Questions Page
What is a Reverse Mortgage?
Why is it called "Reverse"?
How does the Reverse Mortgage process work?
Preparation / Education
1) Initial Inquiry
2) Reverse Mortgage Counseling
3) Application
4) Appraisal
5) Title Work
6) Underwriting
7) Closing
8) After closing
9) Repayment
What are the Industry Consumer Safeguards?
1) Independent Counseling
2) Standard & Capped Interest Rates
3) Limitation on Fees
4) Advance Disclosure
4) No Maturity Date
5) No Prepayment Penalty
6) Right of Rescission.
7) Asset Protection - Non-Recourse Loan
8) No Shared Appreciation
How does a Reverse Mortgage differ from a home equity loan?
Are there any restrictions on how I can use my money?
Do I have to pay Income tax on the proceeds?
Why is a Non Recourse Loan a good thing?
What Happens When the Loan Ends?
What happens to my debt?
When do I pay it back?
What happens to our home when we pass away?
What's the most I can owe?
If my home appreciates in value while I have a Reverse Mortgage, who will be entitled to that money?
Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
Will my heirs owe anything to the mortgage lender if I die before the loan is paid off?
Are there out-of-pocket costs?
What are the typical closing costs?
What is a Service Set-Aside Fee?
What is TALC (Total Annual Loan Cost)?
How safe are Reverse Mortgages?
Who really owns my home?
Why should I choose New Castle Mortgage?
Who should I look to for advice?
What can Families and Advisors do for the Seniors?
Is getting a Reverse Mortgage the best thing for me to do? Why don't I just sell my home?
If there are no payments, what are my responsibilities?
What if there is already an existing mortgage on the home?
Will my right to public benefits be affected?
What happens if my spouse or I need to go to a nursing home?
What happens if we decide to move?
What if I decide to sell my home?
Can I sell my home to my children and continue to live in it?
The Truths about Reverse Mortgages
What is a Reverse Mortgage?
A Reverse Mortgage is loan against your home that requires no repayment for as long as you live there. It enables homeowners age 62 and over to tap into the equity in their home, converting value into income, and never have to make mortgage payments, move, or sell the home. It truly is a "mortgage in reverse". A Reverse Mortgage loan puts to use the value in your home so you can receive cash, a tax-free monthly income, and/or a line of credit. There are no income or credit qualifications and never any monthly payments to make. A reverse mortgage is a way to stay in your home and receive cash to use for anything you see fit. Payoff your current mortgage, payoff other debt, remodeling or repair, health care, or a trip to Tahiti. Best of all, you retain title and remain living in your own home.
Why is it called "Reverse"?
With a Reverse Mortgage your loan grows larger as you take cash advances, make no repayment and have interest added to the amount you owe (your "loan balance"). Reverse Mortgages are sometimes referred to as "rising debt, falling equity" loans. As the amount you owe (your debt) grows larger, your equity (that is, your home's value minus any debt against it) generally gets smaller. In a "forward" mortgage (the kind you normally use to buy a home), your regular monthly repayments make your debt go down over time until you have it all paid off. Meanwhile, your equity is rising as you owe less and less, and as your property value grows (appreciates). So, forward mortgages are "falling debt, rising equity" loans - just the opposite of reverse mortgages.
Here's another way to think of it. In a forward mortgage, you use debt to turn your income into equity. In a reverse mortgage, you use debt to turn your equity into income. You are reversing the deal you used to buy your home. Back then, you had income and wanted equity. Now, you have equity and want income. In both cases you use debt to turn what you have into what you want.
How does the Reverse Mortgage process work?
The following is the typical procedure for obtaining a reverse mortgage. As always, we are available to answer any questions you have along the way. Just call us at 615-279-3476. The entire process typically takes 2-3 weeks from the time you begin, until closing. Of course you are under no obligation to proceed quickly, and you may take as much time as you need during any step in the process.
Preparation / Education
Do your research. Read up on the process as much as you can. Know the company with whom you choose to do business with. Be sure they are credible and that they are experts in the field of Reverse Mortgages. It’s best that they are local with an advisor that you can meet face to face. Contact your local Better Business Bureau (BBB) to verify they are members and in good standing. Only work with a company that is a member of NRMLA (National Reverse Mortgage Lenders Association). Require the company to furnish you with all their credentials, including company license, advisor license, and HUD approval letter.
1) Initial Inquiry
We will discuss with you (either over the phone or in person) your reverse mortgage options. We will provide a summary of available funds and instructions on how you may receive them. Our goal is to help you decide if a reverse mortgage is the right choice for you. If you choose, you may invite other family members or friends to attend the meeting and ask any questions they may have. It is important for everyone in the transaction to make an informed decision.
2) Reverse Mortgage Counseling
This is really an "education session" to be sure that you completely understand the reverse mortgage and your options before you apply for the loan. The counseling is done by an approved agency through HUD. The counseling can be done over the phone or in person, it's your choice. A counseling certificate will be given to you, or mailed to your home. You'll need to sign and date the certificate and we will collect it at the time of application since we need to send it along with the loan application package to the underwriter.
3) Application
After counseling has been done, we will meet to complete the application process. We will come to your home or you may come to our office. We will thoroughly explain all forms and answer any questions you may have. Once again, you may bring a family member or anyone else who is helping you with this transaction.
4) Appraisal
We will order an appraisal on your home from one of our approved appraisers. The appraiser will contact you directly to make the appointment. Please be prepared to pay the appraiser at the time he/she comes to your home. The fee will be verified prior to the appointment. The appraiser will prepare the report and send it to our processor.
5) Title Work
At the same time the appraisal is being done, the title work is being completed by the title or escrow company. This is in preparation for the closing. The title company may call you with questions during the course of their work. Please provide any information they require as this will make for a smooth transaction. Of course, if you have questions, we are just a phone call away.
6) Underwriting
Once the appraisal, title work and any other necessary information is received by New Castle, our processor will submit the loan to underwriting. The underwriter's job is to make sure that the loan file conforms to all applicable guidelines. Once reviewed and approved, it's time for closing.
7) Closing
The title representative will come to your home and conduct the closing, or you may choose to come to our office, or the title company. This is when the legal documents for the reverse mortgage are signed. The title representative will explain all forms and answer any questions you have. After the closing, there is a three day right of recession mandated by the Federal Government. What this means to you is that on the fourth business day after closing the funds you requested will be available to you. During this three days you have the right to cancel the loan.
8) After closing
We are here to answer your questions for as long as you have your reverse mortgage. You'll receive periodic statements about your account showing the current balance, the interest rate in effect, and the amount of funds still available. There will be a customer service number that you may call at any time.
9) Repayment
You will not be required to make monthly payments during the term of your loan. The reverse mortgage becomes due and payable in full once: 1) the home is no longer being used as a primary residence, 2) it is sold, or 3) the borrower passes away. Upon the death of the borrower, the loan may be repaid from the sale of the home or by refinancing the existing reverse mortgage. All remaining equity belongs to the heirs/estate.
What are the Industry Consumer Safeguards?
Today's reverse mortgage programs contain numerous safety features to reassure seniors that they retain their rights as the homeowner, and they cannot put themselves, their home, or their family at any financial risk. These protections are mandated by law for the FHA HECM reverse Mortgage.
Below is a listing of the most important consumer safeguards:
1) Independent Counseling
Before a reverse mortgage application can be processed, the prospective borrower must first meet with an independent counselor. This is really an "education session" to be sure that you completely understand the program and any other options available to you before you obtain the loan. The counseling is done by an approved agency through HUD and there is no obligation to follow through with the reverse mortgage. The counseling can be done over the phone or in person. A counseling certificate will be given to you, or mailed to your home. You'll need to sign and date the certificate and we will collect it at the time of application. We forward the document to the underwriter along with the loan application package.
2) Standard & Capped Interest Rates
You can choose either a fixed interest rate or a rate that adjusts monthly or annually (the borrower chooses). Rates are calculated on one of two indexes--the 1-year U.S. Treasury Constant Maturity Rate published weekly by the Federal Reserve, or the London Interbank Offered Rate (LIBOR)--plus a margin charged by the lender. Both the monthly and annually adjusted rates have lifetime caps.
3) Limitation on Fees
Origination fees are capped and may be financed as part of the reverse mortgage. This means a senior can incur zero out-of-pocket expense to get a reverse mortgage.
4) Advance Disclosure
Under the FHA HECM program, the Total Annual Loan Cost, or "TALC" disclosure, required by the Federal Reserve Board, is provided to the prospective reverse mortgage borrower and displays the total transaction costs over the projected life of the loan. This way, a senior is made fully aware of the costs incurred in obtaining the reverse mortgage.
4) No Maturity Date
A reverse mortgage cannot become due during the homeowner's lifetime. It is a permanent tool. The fact that there are no required payments and there is a lifetime right to occupy the home provides great protection against unforeseen or unanticipated future circumstances, rendering reverse mortgages vastly safer than other loan alternatives.
5) No Prepayment Penalty
Although the loan is not due and payable until the senior permanently moves out of the home, the FHA HECM reverse mortgage can be paid-off at any point prior with no additional fees or costs.
6) Right of Rescission.
After the loan closes, you have up to three days to cancel the transaction, the so-called "right of rescission," for any reason whatsoever and without penalty.
7) Asset Protection - Non-Recourse Loan
The reverse mortgage is a "non-recourse" loan. This means that the amount due can never exceed what the home is worth. Title to the home always remains with the borrower. When the loan becomes due, the lender is repaid the sum of funds advanced plus the accrued interest, but never more than the value of the house. If there is remaining value, it belongs to the homeowner or the estate.
8) No Shared Appreciation
No reverse mortgage product in the marketplace has "equity-sharing" or "shared appreciation" features. The homeowner ALWAYS maintains full title ownership to the property.
How does a Reverse Mortgage differ from a home equity loan?
While both Reverse Mortgages and home equity loans enable you to turn the equity in your home into spendable dollars, there are important differences. With a home equity loan, you must make regular monthly payments to repay the loan. These payments begin as soon as the loan is originated. And, in order to qualify for such a loan, you must meet credit qualifying standards and have a monthly income great enough to make the monthly payments. Additionally, if you fail to make your monthly repayments, you could lose your home.
On the other hand, obtaining a Reverse Mortgage requires NO credit or income qualifications and you will NEVER have to repay the loan as long as the home remains your principal residence. You can't lose your home by failing to make monthly payments because there are no monthly payments to make. In fact the Reverse Mortgage can be structured to pay you a monthly income.
Are there any restrictions on how I can use my money?
None whatsoever! You can use the proceeds any way you choose. After all, it is your money. You are tapping into your own equity in the property that you own. The only requirement is that any outstanding lien (mortgage or other debt against the home) on the property must be paid in full at the time the reverse mortgage is done. After that, the funds from a reverse mortgage can be used for virtually any purpose. You can supplement your current income, pay off bills, make home improvements, travel, the list is virtually endless.
Do I have to pay Income tax on the proceeds?
The proceeds received from a reverse mortgage are loan advances and are not considered taxable income by the IRS. We recommend that you consult your tax advisor.
Why is a Non Recourse Loan a good thing?
A Non-Recourse loan provides the ultimate in protection for the Reverse Mortgage borrowers and their estate. The Non-Recourse feature provides protection for the borrower against changes in the future value of the home. This means that you can live in your home for life, never make another mortgage payment, and never have to worry about passing an obligation on to an heir. In most scenarios, you still pass equity on to your heirs but it's nice to know that regardless of how much money you receive on your reverse mortgage, how long you live in your property, what the interest rates do, or what home values do in the future, you or your heirs can never owe more money than the property is worth. This non-recourse feature is one of the greatest of several built in security benefits the reverse mortgage is known for. So even if you receive monthly loan advances until you are aged 120, and your home declines in value between now and then, and the total of monthly advances becomes greater than your home's value - you will still never owe more than the value of your home. If you or your heirs sell your home in order to pay off the loan, the debt is guaranteed to be limited to the net proceeds from the sale of your home.
What Happens When the Loan Ends?
The loan ends when the last surviving borrower dies, sells the home, or permanently moves away. "Permanently" generally means you have not lived in your home for 12 months in a row. At that point, the loan will need to be repaid. The reverse mortgage can be paid off with the proceeds of the sale of the house, or be refinanced by the heirs of the homeowner's estate. If the proceeds exceed the loan payoff, the owner of the house receives the (profit) difference or if the owner has died, the heirs receive the difference. In cases where the proceeds are not sufficient to pay off the loan, in other words the house sells for less than the loan payoff, then the bank (or mortgage insurance which the bank has on the loan) absorbs the difference. You can never owe more than the value of the home at the time the loan is repaid. The homeowner will NEVER pay the Reverse Lender a greater amount of money than what the house sold for. (Non Recourse Loan) The lender does not have legal recourse to anything other than the value of the home when the loan is to be paid off. Not your income, your other assets, or those of your heirs.
What happens to my debt?
Each month your loan balance grows as you take cash advances, make no repayment, and have interest charges added to the amount you owe. The terms of your Reverse Mortgage allow for you to NEVER be required to repay this debt until you permanently move from your home. From the time you leave your home you or your heirs have one year to settle the debt with the Reverse Mortgage lender. The payoff amount would consist of the original loan amount plus any cash advances and all accrued interest.
When do I pay it back?
The loan balance becomes due when the last surviving borrower dies, sells the home, or permanently moves away. "Permanently" generally means you have not lived in your home for 12 months in a row. The loan must be repaid before the home's title can be transferred to the borrower's heirs. The senior homeowner or his heirs could repay the loan by selling the home, using other funds from the borrower's estate or funds of the heirs, or by taking out a new forward mortgage against the home.
What happens to our home when we pass away?
Your home will transfer to your heirs per your will or estate plan, just like it will now. The outstanding Reverse Mortgage balance must be repaid once your estate is settled. Your heirs may sell the home, pay off the outstanding loan balance and keep the remaining cash, or refinance the outstanding loan balance and keep the home. Your heirs are generally given up to a year to resolve the estate and repay the reverse mortgage. In any case, a reverse mortgage is a "Non Recourse" loan which means that no matter how much you owe at the time the loan is paid off, you or your heirs can never owe more than the value of the home at that time. Of course, if there are proceeds left when the home is sold, that money goes to either you or your heirs. This is a very safe product for both senior homeowners and their families.
What's the most I can owe?
The total amount you will owe at the end of the loan (your "loan balance") equals
• all the cash advances you've received (including any that were used to pay loan fees or costs)
• plus all the interest on them -
• up to the loan's "nonrecourse" limit
Because the loan is a "Non Recourse Loan." you will never owe more than the value of the home at the time the loan is repaid. The homeowner will NEVER pay the Reverse Lender a greater amount of money than what the house sells for.
If my home appreciates in value while I have a Reverse Mortgage, who will be entitled to that money?
With a Reverse Mortgage, you are legally required to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.
Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
No. As long as you continue to occupy the property as your principal residence and abide by the loan agreement, which states that you are responsible for property maintenance and payment of all property taxes and insurance, you can stay in your home as long as you choose. No deficiency judgment may result from your Reverse Mortgage.
Will my heirs owe anything to the mortgage lender if I die before the loan is paid off?
Upon your death, the loan balance, consisting of payments made to you or on your behalf (such as fees) plus accrued interest becomes due and payable. Your heirs may repay the loan by selling the home or by paying off the Reverse Mortgage loan so that they may keep the home. If the loan balance exceeds the value of your property, your estate will owe no more than the value of the property. No additional financial claims may be made against your heirs or estate.
Are there out-of-pocket costs?
The out-of-pocket cash cost to you is most often limited to the fee that covers a property appraisal (to see how much your home is worth). Based on equity, all of the other closing costs can be included in the loan. This means that you can use reverse mortgage funds advanced to you at closing to pay the costs due at that time, and later advances to pay any ongoing costs. The advances are added to your loan balance, and become part of what you owe - and pay interest on.
What are the typical closing costs?
The costs associated with getting a reverse mortgage are similar to those of a regular conventional mortgage. All reverse mortgages have a 2% origination fee and a 2% HUD mortgage insurance premium which can be financed through the proceeds of the loan. Our representative will provide a good-faith estimate of the exact costs involved for you.
Other costs commonly charged to a reverse mortgage borrower can include:
Credit report: Checks for any judgments or tax liens against the borrower -- under $20.
HUD Counseling: $125 – Often there is no charge for this service.
Flood Certification: Determines whether or not the residence is built on a federally designated flood plane -- under $20.
Title insurance: Protect owner and lender against any loss due to disputes over property ownership. ownership of a property – the larger the loan amount, the higher the cost of the title insurance.
Escrow, Settlement or Closing: Typically includes a title search and any other required closing services -- $350
Document Preparation: Preparation of all final closing documents -- $75
Recording: Fees associated with recording the mortgage lien with the County Recorder's Office -- $50-$100
Courier: Overnight mailing of any documents between the lender and the title company or loan investor -- generally under $50
What is a Service Set-Aside Fee?
Although not a closing fee as such, the service fee set-aside is an amount of money deducted from the available loan proceeds at closing to cover the projected costs of servicing your account. Federal regulations allow the loan servicer (which may or may not be the same company as the originating lender) to charge a monthly fee that ranges between $30-$35. The amount of money set-aside is largely determined by the borrower's age and life expectancy.
What is TALC (Total Annual Loan Cost)?
Federal Truth-in-Lending law requires reverse mortgage lenders to disclose the projected annual average cost of these loans in a way that includes ALL of the costs and benefits. This disclosure is called Total Annual Loan Cost (TALC) and it shows you what the single all-inclusive interest rate would be if the lender could only charge interest and not charge any other fees. Specifically, it tells you the annual average rate that would produce the total amount owed at various future points if only that rate were charged on all the cash advances you get that are not used to pay loan costs. In other words, it shows you what you are paying in total for the money you get to spend.
If you end up living in your home well past your life expectancy or your home appreciates at a low rate, your TALC will reflect a lower rate (cost). But if you die, sell, or move within just a few years or your home appreciates a lot, the true cost would be higher. There's no way of avoiding this fundamental risk. You just have to understand it in general, assess the potential range of TALC rates on a specific loan, and decide if it's worth the benefits you expect you'll gain from the reverse mortgage.
How safe are Reverse Mortgages?
Reverse mortgages are a very safe income option. Borrower(s) continue to own the home. Since the loans are "non-recourse" the lender is limited to the home's value at the time of repayment. Your heirs are only involved in inheritance, not debt. With a reverse mortgage, you may remain in your home as long as you like. With no mortgage payments to make, this is an enormous relief of the worry of outliving your savings. Reverse mortgages can help you increase retirement income, provide funds for health care, reduce the impact of and provide funding for estate taxes and maximizes legacy asset transfer.
Who really owns my home?
You do. A reverse mortgage is a lien just like a traditional mortgage. Repayment is required when the last surviving borrower sells the house, moves away or dies. The remaining equity in your home, if any, belongs to you or your heirs. None of your other assets will be affected by a reverse mortgage loan. This debt will never be passed along to the estate or heirs.
Why should I choose New Castle Mortgage?
New Castle Mortgage was founded to specialize in the marketing of Reverse Mortgages to Seniors. New Castle Mortgage is “The Reverse Mortgage Company of Tennessee”. Our loan counselors are friendly, professional, and passionate for the industry we represent. Always, our primarily concern is to focus on looking out for the best interest of our senior customers. We have over 24 years experience originating, processing and closing FHA Government loans throughout Tennessee. We assign a personal Reverse Mortgage Advisor to you who will help you every step of the way, from application to closing. New Castle Mortgage is a member of the National Reverse Mortgage Lenders Association. We are fully licensed by the Tennessee Department of Financial Institutions and are an Equal Housing Lender. We are a proud member of the Better Business Bureau's Reliability Program and belong to our state and national mortgage broker associations, TNAMP (Tennessee Association of Mortgage Brokers) and NAMB ( National Association of Mortgage Professionals). We advertise on CBS News Channel 5, WSM Grand Ole Opry radio, the Yellow Pages, NRMLA, BBB and various print media throughout Tennessee.
Who should I look to for advice?
Decide who you trust, and then discuss your intentions with them. It may be your children, a family member or close friend, spiritual advisor, your attorney or financial advisor. Someone that looks out for your best interest and can help you make this decision. We encourage all interested parties to participate in the discussions regarding the reverse mortgage. Agencies such as AARP and NRMLA are also excellent sources for advice on Reverse Mortgages. We want you to feel confident in your decision and we encourage all interested parties to participate in the discussions regarding your reverse mortgage. The more informed everyone is, the easier it is to see the many benefits and "safety nets" that are built into the Reverse Mortgage.
What can Families and Advisors do for the Seniors?
In many Reverse Mortgage transactions, the immediate family members take on a crucial role as advisors to the transaction process. Most often, the children of the senior are the most trusted advisor when it comes to a senior's finances. However, a family friend, a trusted advisor, or someone who has a genuine interest in helping the senior party can also be of assistance, especially in the absence of a close family member. It is recommended that the family members or advisors be involved in the initial meetings, the presentation and the HUD counseling service to make sure that everyone fully understands the entire Reverse Mortgage process. If you are acting as an advisor to a senior homeowner, there are several things you should know about reverse mortgages and how they can help seniors live more comfortably and securely.
• A safe, proven choice.
A HECM FHA Reverse Mortgage is a government-protected financial tool that has helped over 150,000 seniors enjoy better lives. Many safeguards are built into the program to protect seniors from predatory lending practices.
• The best of both worlds.
A Reverse Mortgage can be the right choice for senior homeowners who need additional income without having to sell their homes to raise cash. With a reverse mortgage, the homeowner can get a monthly payment, a line of credit or a lump sum distribution without having to move or give up title to the home.
• Ideal liquidity tool.
A reverse mortgage is an ideal way to create liquidity from a real estate asset. This liquidity can enable seniors to pay bills, make home repairs, retire an existing mortgage, or to purchase such health-related services as long-term care insurance.
• Tax-free money.
Since a reverse mortgage taps into existing home equity, the proceeds are not taxed as income.
Is getting a Reverse Mortgage the best thing for me to do? Why don't I just sell my home?
Only you can decide what a reverse mortgage is worth to you. It probably depends most on what you would use one for. Increasing your monthly income, having a cash reserve (equity line of credit) for irregular or unexpected expenses, paying off debt that requires monthly repayments, repairing or improving your home, getting the services you need to remain independent, or generally improving the quality of your life are all benefits that can be achieved through a reverse mortgage. However, in evaluating the worth of a reverse mortgage it may be helpful to consider a major alternative: selling your home and moving.
Consider the following:
• how much money could you could get by selling your home?
• what it would cost you to buy & maintain or rent a new one?
• how much you could safely earn on sale proceeds not used for a new home?
Also, looking into other housing options, comparing housing alternatives first-hand and in-person, may help you decide if a reverse mortgage is best for you.
• You may find a different home, neighborhood, or community with an array of services or amenities that is much more attractive than you would expect to find.
• Or, you may only confirm what you were pretty sure of all along: that where you live now is easily the best place for you to be.
Either way, researching your options will give you a good idea of the overall costs and benefits of staying versus moving. This will give you a better sense of what's valuable to you. And make it easier to evaluate the cost of a reverse mortgage.
If there are no payments, what are my responsibilities?
Like all homeowners, you still are required to pay property taxes and provide property insurance and maintain the home. The home must be your principal residence.
What if there is already an existing mortgage on the home?
The reverse mortgage is often used to pay off an existing loan. Existing mortgages must be paid off at closing.
Will my right to public benefits be affected?
Social Security and Medicare benefits are not affected by reverse mortgages. But Supplemental Security Income (SSI) and Medicaid are different. In general, these programs are not affected by your loan advances if you spend them during the calendar month in which you get them. But if you keep an advance past the end of the calendar month (in a checking or savings account, for example), then it will count as a "liquid asset." If your total liquid assets at the end of any month are greater than $2,000 for a single person or $3,000 for a couple, you could lose your eligibility. Therefore, a Reverse Mortgage borrower who also receives SSI should never draw more money than he or she actually needs to spend that month. Regulations for state-administered programs such as Medicaid, AFDC, and food stamps and for state-funded welfare programs (such as state supplements to SSI), all have different eligibility requirements. Therefore, we suggest that you consult a benefits specialist at the local offices for these programs to determine how Reverse Mortgage payments may affect your particular situation
What happens if my spouse or I need to go to a nursing home?
As long as one homeowner / borower remains in the home, the reverse mortgage does not need to be closed. If the last homeowner needs to go to a nursing home but intends to return, the reverse mortgage doesn't need to be repaid until that homeowner has been gone for 12 consecutive months.
What happens if we decide to move?
Your home needs to remain your principal place of residence when you have a reverse mortgage. You may leave your home for any reason for up to 12 consecutive months. If you decide to sell your home, you simply repay the reverse mortgage loan balance from the sale proceeds exactly as you would with a conventional forward mortgage and keep the remaining cash.
What if I decide to sell my home?
If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender at the time of sale. You would receive any proceeds exceeding the loan balance.
Can I sell my home to my children and continue to live in it?
If you sell your home to your children, or any other individual, the Reverse Mortgage loan will be due and payable at settlement. After the loan is repaid, occupancy arrangements are at the discretion of the new owners.
You will always own your own home!
You will always retain ownership of your home throughout the term of the reverse mortgage, just the same as with a regular home purchase or refinance mortgage. Nobody else has title to your home but you. If you permanently move out of your home or the last surviving borrower dies, the loan must be repaid. The control and title to the home WILL NOT transfer to the bank. It will go to whomever you specify in your will or trust.
You are not required to make any loan repayment as long as you live in your home!
There are never any monthly payments. Never! Payment of insurance, property taxes, and general upkeep of the home are the only responsibilities of the homeowner.
There are no income, credit, or health requirements to qualify!
To qualify, the homeowner should have sufficient value (equity) in the home, be at least 62 years of age, and use the home as their primary residence.
The amount you can receive depends upon the ages of you and your spouse, the appraised value of your home, and the total amount presently owed on your home!
All mortgages, home equity lines of credit, and liens against your home must be paid-off at closing, usually from closing proceeds.
It is your decision as to the method by which you choose to receive your money!
You may receive the money all-at-once in a lump sum, as a line-of-credit, in monthly payments, or you can use a combination of any of the above. It’s completely up to you.
Social Security and Medicare benefits are not affected!
Since you are simply accessing the equity in your own home, you are not “earning income”, thus it has no impact on your other benefits.
Fees can be financed!
Unlike a home purchase or refinance mortgage, all of these costs can be financed into the reverse mortgage. Most of the same costs of home purchase mortgages apply to reverse mortgages. You can expect to be charged an origination fee, a mortgage insurance fee, and certain other standard closing costs. These expenses are controlled and regulated by the Federal Government to protect Senior consumers. You are only required to pay for a current FHA-certified appraisal, since the value of your home is a factor in determining the amount of funds available to you.
Your home does not need to be free and clear or paid-off in order to qualify!
You can have an existing mortgage on your home and it will be paid-off through the proceeds of the reverse mortgage.
No repayment is made until the home is sold or the owner (last remaining title holder) permanently moves out or passes away!
When any of these situations occurs, you or your heirs can choose to pay the balance due on the reverse mortgage and keep the home, or sell the home and use a portion of the proceeds to pay off the reverse mortgage.
If you have any questions you would like to ask please click here.
Why is it called "Reverse"?
How does the Reverse Mortgage process work?
Preparation / Education
1) Initial Inquiry
2) Reverse Mortgage Counseling
3) Application
4) Appraisal
5) Title Work
6) Underwriting
7) Closing
8) After closing
9) Repayment
What are the Industry Consumer Safeguards?
1) Independent Counseling
2) Standard & Capped Interest Rates
3) Limitation on Fees
4) Advance Disclosure
4) No Maturity Date
5) No Prepayment Penalty
6) Right of Rescission.
7) Asset Protection - Non-Recourse Loan
8) No Shared Appreciation
How does a Reverse Mortgage differ from a home equity loan?
Are there any restrictions on how I can use my money?
Do I have to pay Income tax on the proceeds?
Why is a Non Recourse Loan a good thing?
What Happens When the Loan Ends?
What happens to my debt?
When do I pay it back?
What happens to our home when we pass away?
What's the most I can owe?
If my home appreciates in value while I have a Reverse Mortgage, who will be entitled to that money?
Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
Will my heirs owe anything to the mortgage lender if I die before the loan is paid off?
Are there out-of-pocket costs?
What are the typical closing costs?
What is a Service Set-Aside Fee?
What is TALC (Total Annual Loan Cost)?
How safe are Reverse Mortgages?
Who really owns my home?
Why should I choose New Castle Mortgage?
Who should I look to for advice?
What can Families and Advisors do for the Seniors?
Is getting a Reverse Mortgage the best thing for me to do? Why don't I just sell my home?
If there are no payments, what are my responsibilities?
What if there is already an existing mortgage on the home?
Will my right to public benefits be affected?
What happens if my spouse or I need to go to a nursing home?
What happens if we decide to move?
What if I decide to sell my home?
Can I sell my home to my children and continue to live in it?
The Truths about Reverse Mortgages
What is a Reverse Mortgage?
A Reverse Mortgage is loan against your home that requires no repayment for as long as you live there. It enables homeowners age 62 and over to tap into the equity in their home, converting value into income, and never have to make mortgage payments, move, or sell the home. It truly is a "mortgage in reverse". A Reverse Mortgage loan puts to use the value in your home so you can receive cash, a tax-free monthly income, and/or a line of credit. There are no income or credit qualifications and never any monthly payments to make. A reverse mortgage is a way to stay in your home and receive cash to use for anything you see fit. Payoff your current mortgage, payoff other debt, remodeling or repair, health care, or a trip to Tahiti. Best of all, you retain title and remain living in your own home.
Why is it called "Reverse"?
With a Reverse Mortgage your loan grows larger as you take cash advances, make no repayment and have interest added to the amount you owe (your "loan balance"). Reverse Mortgages are sometimes referred to as "rising debt, falling equity" loans. As the amount you owe (your debt) grows larger, your equity (that is, your home's value minus any debt against it) generally gets smaller. In a "forward" mortgage (the kind you normally use to buy a home), your regular monthly repayments make your debt go down over time until you have it all paid off. Meanwhile, your equity is rising as you owe less and less, and as your property value grows (appreciates). So, forward mortgages are "falling debt, rising equity" loans - just the opposite of reverse mortgages.
Here's another way to think of it. In a forward mortgage, you use debt to turn your income into equity. In a reverse mortgage, you use debt to turn your equity into income. You are reversing the deal you used to buy your home. Back then, you had income and wanted equity. Now, you have equity and want income. In both cases you use debt to turn what you have into what you want.
How does the Reverse Mortgage process work?
The following is the typical procedure for obtaining a reverse mortgage. As always, we are available to answer any questions you have along the way. Just call us at 615-279-3476. The entire process typically takes 2-3 weeks from the time you begin, until closing. Of course you are under no obligation to proceed quickly, and you may take as much time as you need during any step in the process.
Preparation / Education
Do your research. Read up on the process as much as you can. Know the company with whom you choose to do business with. Be sure they are credible and that they are experts in the field of Reverse Mortgages. It’s best that they are local with an advisor that you can meet face to face. Contact your local Better Business Bureau (BBB) to verify they are members and in good standing. Only work with a company that is a member of NRMLA (National Reverse Mortgage Lenders Association). Require the company to furnish you with all their credentials, including company license, advisor license, and HUD approval letter.
1) Initial Inquiry
We will discuss with you (either over the phone or in person) your reverse mortgage options. We will provide a summary of available funds and instructions on how you may receive them. Our goal is to help you decide if a reverse mortgage is the right choice for you. If you choose, you may invite other family members or friends to attend the meeting and ask any questions they may have. It is important for everyone in the transaction to make an informed decision.
2) Reverse Mortgage Counseling
This is really an "education session" to be sure that you completely understand the reverse mortgage and your options before you apply for the loan. The counseling is done by an approved agency through HUD. The counseling can be done over the phone or in person, it's your choice. A counseling certificate will be given to you, or mailed to your home. You'll need to sign and date the certificate and we will collect it at the time of application since we need to send it along with the loan application package to the underwriter.
3) Application
After counseling has been done, we will meet to complete the application process. We will come to your home or you may come to our office. We will thoroughly explain all forms and answer any questions you may have. Once again, you may bring a family member or anyone else who is helping you with this transaction.
4) Appraisal
We will order an appraisal on your home from one of our approved appraisers. The appraiser will contact you directly to make the appointment. Please be prepared to pay the appraiser at the time he/she comes to your home. The fee will be verified prior to the appointment. The appraiser will prepare the report and send it to our processor.
5) Title Work
At the same time the appraisal is being done, the title work is being completed by the title or escrow company. This is in preparation for the closing. The title company may call you with questions during the course of their work. Please provide any information they require as this will make for a smooth transaction. Of course, if you have questions, we are just a phone call away.
6) Underwriting
Once the appraisal, title work and any other necessary information is received by New Castle, our processor will submit the loan to underwriting. The underwriter's job is to make sure that the loan file conforms to all applicable guidelines. Once reviewed and approved, it's time for closing.
7) Closing
The title representative will come to your home and conduct the closing, or you may choose to come to our office, or the title company. This is when the legal documents for the reverse mortgage are signed. The title representative will explain all forms and answer any questions you have. After the closing, there is a three day right of recession mandated by the Federal Government. What this means to you is that on the fourth business day after closing the funds you requested will be available to you. During this three days you have the right to cancel the loan.
8) After closing
We are here to answer your questions for as long as you have your reverse mortgage. You'll receive periodic statements about your account showing the current balance, the interest rate in effect, and the amount of funds still available. There will be a customer service number that you may call at any time.
9) Repayment
You will not be required to make monthly payments during the term of your loan. The reverse mortgage becomes due and payable in full once: 1) the home is no longer being used as a primary residence, 2) it is sold, or 3) the borrower passes away. Upon the death of the borrower, the loan may be repaid from the sale of the home or by refinancing the existing reverse mortgage. All remaining equity belongs to the heirs/estate.
What are the Industry Consumer Safeguards?
Today's reverse mortgage programs contain numerous safety features to reassure seniors that they retain their rights as the homeowner, and they cannot put themselves, their home, or their family at any financial risk. These protections are mandated by law for the FHA HECM reverse Mortgage.
Below is a listing of the most important consumer safeguards:
1) Independent Counseling
Before a reverse mortgage application can be processed, the prospective borrower must first meet with an independent counselor. This is really an "education session" to be sure that you completely understand the program and any other options available to you before you obtain the loan. The counseling is done by an approved agency through HUD and there is no obligation to follow through with the reverse mortgage. The counseling can be done over the phone or in person. A counseling certificate will be given to you, or mailed to your home. You'll need to sign and date the certificate and we will collect it at the time of application. We forward the document to the underwriter along with the loan application package.
2) Standard & Capped Interest Rates
You can choose either a fixed interest rate or a rate that adjusts monthly or annually (the borrower chooses). Rates are calculated on one of two indexes--the 1-year U.S. Treasury Constant Maturity Rate published weekly by the Federal Reserve, or the London Interbank Offered Rate (LIBOR)--plus a margin charged by the lender. Both the monthly and annually adjusted rates have lifetime caps.
3) Limitation on Fees
Origination fees are capped and may be financed as part of the reverse mortgage. This means a senior can incur zero out-of-pocket expense to get a reverse mortgage.
4) Advance Disclosure
Under the FHA HECM program, the Total Annual Loan Cost, or "TALC" disclosure, required by the Federal Reserve Board, is provided to the prospective reverse mortgage borrower and displays the total transaction costs over the projected life of the loan. This way, a senior is made fully aware of the costs incurred in obtaining the reverse mortgage.
4) No Maturity Date
A reverse mortgage cannot become due during the homeowner's lifetime. It is a permanent tool. The fact that there are no required payments and there is a lifetime right to occupy the home provides great protection against unforeseen or unanticipated future circumstances, rendering reverse mortgages vastly safer than other loan alternatives.
5) No Prepayment Penalty
Although the loan is not due and payable until the senior permanently moves out of the home, the FHA HECM reverse mortgage can be paid-off at any point prior with no additional fees or costs.
6) Right of Rescission.
After the loan closes, you have up to three days to cancel the transaction, the so-called "right of rescission," for any reason whatsoever and without penalty.
7) Asset Protection - Non-Recourse Loan
The reverse mortgage is a "non-recourse" loan. This means that the amount due can never exceed what the home is worth. Title to the home always remains with the borrower. When the loan becomes due, the lender is repaid the sum of funds advanced plus the accrued interest, but never more than the value of the house. If there is remaining value, it belongs to the homeowner or the estate.
8) No Shared Appreciation
No reverse mortgage product in the marketplace has "equity-sharing" or "shared appreciation" features. The homeowner ALWAYS maintains full title ownership to the property.
How does a Reverse Mortgage differ from a home equity loan?
While both Reverse Mortgages and home equity loans enable you to turn the equity in your home into spendable dollars, there are important differences. With a home equity loan, you must make regular monthly payments to repay the loan. These payments begin as soon as the loan is originated. And, in order to qualify for such a loan, you must meet credit qualifying standards and have a monthly income great enough to make the monthly payments. Additionally, if you fail to make your monthly repayments, you could lose your home.
On the other hand, obtaining a Reverse Mortgage requires NO credit or income qualifications and you will NEVER have to repay the loan as long as the home remains your principal residence. You can't lose your home by failing to make monthly payments because there are no monthly payments to make. In fact the Reverse Mortgage can be structured to pay you a monthly income.
Are there any restrictions on how I can use my money?
None whatsoever! You can use the proceeds any way you choose. After all, it is your money. You are tapping into your own equity in the property that you own. The only requirement is that any outstanding lien (mortgage or other debt against the home) on the property must be paid in full at the time the reverse mortgage is done. After that, the funds from a reverse mortgage can be used for virtually any purpose. You can supplement your current income, pay off bills, make home improvements, travel, the list is virtually endless.
Do I have to pay Income tax on the proceeds?
The proceeds received from a reverse mortgage are loan advances and are not considered taxable income by the IRS. We recommend that you consult your tax advisor.
Why is a Non Recourse Loan a good thing?
A Non-Recourse loan provides the ultimate in protection for the Reverse Mortgage borrowers and their estate. The Non-Recourse feature provides protection for the borrower against changes in the future value of the home. This means that you can live in your home for life, never make another mortgage payment, and never have to worry about passing an obligation on to an heir. In most scenarios, you still pass equity on to your heirs but it's nice to know that regardless of how much money you receive on your reverse mortgage, how long you live in your property, what the interest rates do, or what home values do in the future, you or your heirs can never owe more money than the property is worth. This non-recourse feature is one of the greatest of several built in security benefits the reverse mortgage is known for. So even if you receive monthly loan advances until you are aged 120, and your home declines in value between now and then, and the total of monthly advances becomes greater than your home's value - you will still never owe more than the value of your home. If you or your heirs sell your home in order to pay off the loan, the debt is guaranteed to be limited to the net proceeds from the sale of your home.
What Happens When the Loan Ends?
The loan ends when the last surviving borrower dies, sells the home, or permanently moves away. "Permanently" generally means you have not lived in your home for 12 months in a row. At that point, the loan will need to be repaid. The reverse mortgage can be paid off with the proceeds of the sale of the house, or be refinanced by the heirs of the homeowner's estate. If the proceeds exceed the loan payoff, the owner of the house receives the (profit) difference or if the owner has died, the heirs receive the difference. In cases where the proceeds are not sufficient to pay off the loan, in other words the house sells for less than the loan payoff, then the bank (or mortgage insurance which the bank has on the loan) absorbs the difference. You can never owe more than the value of the home at the time the loan is repaid. The homeowner will NEVER pay the Reverse Lender a greater amount of money than what the house sold for. (Non Recourse Loan) The lender does not have legal recourse to anything other than the value of the home when the loan is to be paid off. Not your income, your other assets, or those of your heirs.
What happens to my debt?
Each month your loan balance grows as you take cash advances, make no repayment, and have interest charges added to the amount you owe. The terms of your Reverse Mortgage allow for you to NEVER be required to repay this debt until you permanently move from your home. From the time you leave your home you or your heirs have one year to settle the debt with the Reverse Mortgage lender. The payoff amount would consist of the original loan amount plus any cash advances and all accrued interest.
When do I pay it back?
The loan balance becomes due when the last surviving borrower dies, sells the home, or permanently moves away. "Permanently" generally means you have not lived in your home for 12 months in a row. The loan must be repaid before the home's title can be transferred to the borrower's heirs. The senior homeowner or his heirs could repay the loan by selling the home, using other funds from the borrower's estate or funds of the heirs, or by taking out a new forward mortgage against the home.
What happens to our home when we pass away?
Your home will transfer to your heirs per your will or estate plan, just like it will now. The outstanding Reverse Mortgage balance must be repaid once your estate is settled. Your heirs may sell the home, pay off the outstanding loan balance and keep the remaining cash, or refinance the outstanding loan balance and keep the home. Your heirs are generally given up to a year to resolve the estate and repay the reverse mortgage. In any case, a reverse mortgage is a "Non Recourse" loan which means that no matter how much you owe at the time the loan is paid off, you or your heirs can never owe more than the value of the home at that time. Of course, if there are proceeds left when the home is sold, that money goes to either you or your heirs. This is a very safe product for both senior homeowners and their families.
What's the most I can owe?
The total amount you will owe at the end of the loan (your "loan balance") equals
• all the cash advances you've received (including any that were used to pay loan fees or costs)
• plus all the interest on them -
• up to the loan's "nonrecourse" limit
Because the loan is a "Non Recourse Loan." you will never owe more than the value of the home at the time the loan is repaid. The homeowner will NEVER pay the Reverse Lender a greater amount of money than what the house sells for.
If my home appreciates in value while I have a Reverse Mortgage, who will be entitled to that money?
With a Reverse Mortgage, you are legally required to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.
Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
No. As long as you continue to occupy the property as your principal residence and abide by the loan agreement, which states that you are responsible for property maintenance and payment of all property taxes and insurance, you can stay in your home as long as you choose. No deficiency judgment may result from your Reverse Mortgage.
Will my heirs owe anything to the mortgage lender if I die before the loan is paid off?
Upon your death, the loan balance, consisting of payments made to you or on your behalf (such as fees) plus accrued interest becomes due and payable. Your heirs may repay the loan by selling the home or by paying off the Reverse Mortgage loan so that they may keep the home. If the loan balance exceeds the value of your property, your estate will owe no more than the value of the property. No additional financial claims may be made against your heirs or estate.
Are there out-of-pocket costs?
The out-of-pocket cash cost to you is most often limited to the fee that covers a property appraisal (to see how much your home is worth). Based on equity, all of the other closing costs can be included in the loan. This means that you can use reverse mortgage funds advanced to you at closing to pay the costs due at that time, and later advances to pay any ongoing costs. The advances are added to your loan balance, and become part of what you owe - and pay interest on.
What are the typical closing costs?
The costs associated with getting a reverse mortgage are similar to those of a regular conventional mortgage. All reverse mortgages have a 2% origination fee and a 2% HUD mortgage insurance premium which can be financed through the proceeds of the loan. Our representative will provide a good-faith estimate of the exact costs involved for you.
Other costs commonly charged to a reverse mortgage borrower can include:
Credit report: Checks for any judgments or tax liens against the borrower -- under $20.
HUD Counseling: $125 – Often there is no charge for this service.
Flood Certification: Determines whether or not the residence is built on a federally designated flood plane -- under $20.
Title insurance: Protect owner and lender against any loss due to disputes over property ownership. ownership of a property – the larger the loan amount, the higher the cost of the title insurance.
Escrow, Settlement or Closing: Typically includes a title search and any other required closing services -- $350
Document Preparation: Preparation of all final closing documents -- $75
Recording: Fees associated with recording the mortgage lien with the County Recorder's Office -- $50-$100
Courier: Overnight mailing of any documents between the lender and the title company or loan investor -- generally under $50
What is a Service Set-Aside Fee?
Although not a closing fee as such, the service fee set-aside is an amount of money deducted from the available loan proceeds at closing to cover the projected costs of servicing your account. Federal regulations allow the loan servicer (which may or may not be the same company as the originating lender) to charge a monthly fee that ranges between $30-$35. The amount of money set-aside is largely determined by the borrower's age and life expectancy.
What is TALC (Total Annual Loan Cost)?
Federal Truth-in-Lending law requires reverse mortgage lenders to disclose the projected annual average cost of these loans in a way that includes ALL of the costs and benefits. This disclosure is called Total Annual Loan Cost (TALC) and it shows you what the single all-inclusive interest rate would be if the lender could only charge interest and not charge any other fees. Specifically, it tells you the annual average rate that would produce the total amount owed at various future points if only that rate were charged on all the cash advances you get that are not used to pay loan costs. In other words, it shows you what you are paying in total for the money you get to spend.
If you end up living in your home well past your life expectancy or your home appreciates at a low rate, your TALC will reflect a lower rate (cost). But if you die, sell, or move within just a few years or your home appreciates a lot, the true cost would be higher. There's no way of avoiding this fundamental risk. You just have to understand it in general, assess the potential range of TALC rates on a specific loan, and decide if it's worth the benefits you expect you'll gain from the reverse mortgage.
How safe are Reverse Mortgages?
Reverse mortgages are a very safe income option. Borrower(s) continue to own the home. Since the loans are "non-recourse" the lender is limited to the home's value at the time of repayment. Your heirs are only involved in inheritance, not debt. With a reverse mortgage, you may remain in your home as long as you like. With no mortgage payments to make, this is an enormous relief of the worry of outliving your savings. Reverse mortgages can help you increase retirement income, provide funds for health care, reduce the impact of and provide funding for estate taxes and maximizes legacy asset transfer.
Who really owns my home?
You do. A reverse mortgage is a lien just like a traditional mortgage. Repayment is required when the last surviving borrower sells the house, moves away or dies. The remaining equity in your home, if any, belongs to you or your heirs. None of your other assets will be affected by a reverse mortgage loan. This debt will never be passed along to the estate or heirs.
Why should I choose New Castle Mortgage?
New Castle Mortgage was founded to specialize in the marketing of Reverse Mortgages to Seniors. New Castle Mortgage is “The Reverse Mortgage Company of Tennessee”. Our loan counselors are friendly, professional, and passionate for the industry we represent. Always, our primarily concern is to focus on looking out for the best interest of our senior customers. We have over 24 years experience originating, processing and closing FHA Government loans throughout Tennessee. We assign a personal Reverse Mortgage Advisor to you who will help you every step of the way, from application to closing. New Castle Mortgage is a member of the National Reverse Mortgage Lenders Association. We are fully licensed by the Tennessee Department of Financial Institutions and are an Equal Housing Lender. We are a proud member of the Better Business Bureau's Reliability Program and belong to our state and national mortgage broker associations, TNAMP (Tennessee Association of Mortgage Brokers) and NAMB ( National Association of Mortgage Professionals). We advertise on CBS News Channel 5, WSM Grand Ole Opry radio, the Yellow Pages, NRMLA, BBB and various print media throughout Tennessee.
Who should I look to for advice?
Decide who you trust, and then discuss your intentions with them. It may be your children, a family member or close friend, spiritual advisor, your attorney or financial advisor. Someone that looks out for your best interest and can help you make this decision. We encourage all interested parties to participate in the discussions regarding the reverse mortgage. Agencies such as AARP and NRMLA are also excellent sources for advice on Reverse Mortgages. We want you to feel confident in your decision and we encourage all interested parties to participate in the discussions regarding your reverse mortgage. The more informed everyone is, the easier it is to see the many benefits and "safety nets" that are built into the Reverse Mortgage.
What can Families and Advisors do for the Seniors?
In many Reverse Mortgage transactions, the immediate family members take on a crucial role as advisors to the transaction process. Most often, the children of the senior are the most trusted advisor when it comes to a senior's finances. However, a family friend, a trusted advisor, or someone who has a genuine interest in helping the senior party can also be of assistance, especially in the absence of a close family member. It is recommended that the family members or advisors be involved in the initial meetings, the presentation and the HUD counseling service to make sure that everyone fully understands the entire Reverse Mortgage process. If you are acting as an advisor to a senior homeowner, there are several things you should know about reverse mortgages and how they can help seniors live more comfortably and securely.
• A safe, proven choice.
A HECM FHA Reverse Mortgage is a government-protected financial tool that has helped over 150,000 seniors enjoy better lives. Many safeguards are built into the program to protect seniors from predatory lending practices.
• The best of both worlds.
A Reverse Mortgage can be the right choice for senior homeowners who need additional income without having to sell their homes to raise cash. With a reverse mortgage, the homeowner can get a monthly payment, a line of credit or a lump sum distribution without having to move or give up title to the home.
• Ideal liquidity tool.
A reverse mortgage is an ideal way to create liquidity from a real estate asset. This liquidity can enable seniors to pay bills, make home repairs, retire an existing mortgage, or to purchase such health-related services as long-term care insurance.
• Tax-free money.
Since a reverse mortgage taps into existing home equity, the proceeds are not taxed as income.
Is getting a Reverse Mortgage the best thing for me to do? Why don't I just sell my home?
Only you can decide what a reverse mortgage is worth to you. It probably depends most on what you would use one for. Increasing your monthly income, having a cash reserve (equity line of credit) for irregular or unexpected expenses, paying off debt that requires monthly repayments, repairing or improving your home, getting the services you need to remain independent, or generally improving the quality of your life are all benefits that can be achieved through a reverse mortgage. However, in evaluating the worth of a reverse mortgage it may be helpful to consider a major alternative: selling your home and moving.
Consider the following:
• how much money could you could get by selling your home?
• what it would cost you to buy & maintain or rent a new one?
• how much you could safely earn on sale proceeds not used for a new home?
Also, looking into other housing options, comparing housing alternatives first-hand and in-person, may help you decide if a reverse mortgage is best for you.
• You may find a different home, neighborhood, or community with an array of services or amenities that is much more attractive than you would expect to find.
• Or, you may only confirm what you were pretty sure of all along: that where you live now is easily the best place for you to be.
Either way, researching your options will give you a good idea of the overall costs and benefits of staying versus moving. This will give you a better sense of what's valuable to you. And make it easier to evaluate the cost of a reverse mortgage.
If there are no payments, what are my responsibilities?
Like all homeowners, you still are required to pay property taxes and provide property insurance and maintain the home. The home must be your principal residence.
What if there is already an existing mortgage on the home?
The reverse mortgage is often used to pay off an existing loan. Existing mortgages must be paid off at closing.
Will my right to public benefits be affected?
Social Security and Medicare benefits are not affected by reverse mortgages. But Supplemental Security Income (SSI) and Medicaid are different. In general, these programs are not affected by your loan advances if you spend them during the calendar month in which you get them. But if you keep an advance past the end of the calendar month (in a checking or savings account, for example), then it will count as a "liquid asset." If your total liquid assets at the end of any month are greater than $2,000 for a single person or $3,000 for a couple, you could lose your eligibility. Therefore, a Reverse Mortgage borrower who also receives SSI should never draw more money than he or she actually needs to spend that month. Regulations for state-administered programs such as Medicaid, AFDC, and food stamps and for state-funded welfare programs (such as state supplements to SSI), all have different eligibility requirements. Therefore, we suggest that you consult a benefits specialist at the local offices for these programs to determine how Reverse Mortgage payments may affect your particular situation
What happens if my spouse or I need to go to a nursing home?
As long as one homeowner / borower remains in the home, the reverse mortgage does not need to be closed. If the last homeowner needs to go to a nursing home but intends to return, the reverse mortgage doesn't need to be repaid until that homeowner has been gone for 12 consecutive months.
What happens if we decide to move?
Your home needs to remain your principal place of residence when you have a reverse mortgage. You may leave your home for any reason for up to 12 consecutive months. If you decide to sell your home, you simply repay the reverse mortgage loan balance from the sale proceeds exactly as you would with a conventional forward mortgage and keep the remaining cash.
What if I decide to sell my home?
If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender at the time of sale. You would receive any proceeds exceeding the loan balance.
Can I sell my home to my children and continue to live in it?
If you sell your home to your children, or any other individual, the Reverse Mortgage loan will be due and payable at settlement. After the loan is repaid, occupancy arrangements are at the discretion of the new owners.
You will always own your own home!
You will always retain ownership of your home throughout the term of the reverse mortgage, just the same as with a regular home purchase or refinance mortgage. Nobody else has title to your home but you. If you permanently move out of your home or the last surviving borrower dies, the loan must be repaid. The control and title to the home WILL NOT transfer to the bank. It will go to whomever you specify in your will or trust.
You are not required to make any loan repayment as long as you live in your home!
There are never any monthly payments. Never! Payment of insurance, property taxes, and general upkeep of the home are the only responsibilities of the homeowner.
There are no income, credit, or health requirements to qualify!
To qualify, the homeowner should have sufficient value (equity) in the home, be at least 62 years of age, and use the home as their primary residence.
The amount you can receive depends upon the ages of you and your spouse, the appraised value of your home, and the total amount presently owed on your home!
All mortgages, home equity lines of credit, and liens against your home must be paid-off at closing, usually from closing proceeds.
It is your decision as to the method by which you choose to receive your money!
You may receive the money all-at-once in a lump sum, as a line-of-credit, in monthly payments, or you can use a combination of any of the above. It’s completely up to you.
Social Security and Medicare benefits are not affected!
Since you are simply accessing the equity in your own home, you are not “earning income”, thus it has no impact on your other benefits.
Fees can be financed!
Unlike a home purchase or refinance mortgage, all of these costs can be financed into the reverse mortgage. Most of the same costs of home purchase mortgages apply to reverse mortgages. You can expect to be charged an origination fee, a mortgage insurance fee, and certain other standard closing costs. These expenses are controlled and regulated by the Federal Government to protect Senior consumers. You are only required to pay for a current FHA-certified appraisal, since the value of your home is a factor in determining the amount of funds available to you.
Your home does not need to be free and clear or paid-off in order to qualify!
You can have an existing mortgage on your home and it will be paid-off through the proceeds of the reverse mortgage.
No repayment is made until the home is sold or the owner (last remaining title holder) permanently moves out or passes away!
When any of these situations occurs, you or your heirs can choose to pay the balance due on the reverse mortgage and keep the home, or sell the home and use a portion of the proceeds to pay off the reverse mortgage.
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