10 questions about Reverse Mortgages For Seniors
10 Question About Reverse Mortgages For Seniors
With todays economic conditions seniors are under financial pressure like never before. FHA’s Home Equity Conversion Mortgage HECM or Reverse Mortgage may be a solution to these problems for qualifying seniors.
1. What is a Reverse Mortgage?
A reverse mortgage is a unique kind of home loan that allows you to convert some of your home’s equity into cash. Your home’s equity that has built up over the years from your mortgage payments can be paid to you. However, unlike a traditional second mortgage or home equity loan, you don’t have to repay until the borrower(s) no longer use the home as their primary residence or fail to meet the mortgage obligations.
2. What do I need to qualify for FHA’s HECM reverse mortgage?
To qualify for a FHA HECM, you must be a homeowner 62 years of age or older, own the home outright, or have a low balance on your mortgage that can be paid off at closing with money from the reverse mortgage, and you must live in the home.
3. Can I apply even if I didn’t buy my current home with FHA mortgage insurance?
Yes. Its no matter if you didn’t buy your home with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.
4. What types of homes are eligible?
Your home is eligible for an FHA HECM if your home meets the following qualifications. Your home must be either a single family home or up to a 4 unit home with one owner occupied unit. Condominiums must be HUD approved and manufactured homes must meet FHA eligiblity requirements.
5. How is a reverse mortgage different from a bank home equity loan?
With traditional second mortgages, or an equity line of credit, you have to have a sufficient income to debt ratio to qualify for the loan. You are also required to make monthly mortgage payments. A reverse mortgage is different because it pays you, and your current income isn’t a factor. The amount that can be borrowed depends on your age, the current interest rate, and the current appraised value of your home, sales price or FHA mortgage limits, whatever is less. Usually, the greater your home’s value, the older you are, and the lower the interest, the more you can borrow.
With a reverse mortgage, you don’t make monthly mortgage payments, the lender pays you according to the payment plan you selected. Like every homeowner, you are still required to pay your real estate taxes, insurance and utilities. With an FHA HECM you can’t be foreclosed on or forced to leave your home because you “missed your loan payment.”
6. When does my reverse mortgage become due and payable?
A reverse mortgage must be repaid in full when you die or sell the home. The loan also becomes due and payable if:
Your property taxes go unpaid, or you violate other obligations
You permenently move to a new principal residence.
You, or the last borrower, fail to live in the home for 12 consecutive months. For an example; if you (or the last borrower) were to have a 12-month or longer stay in a hospital or nursing home.
The property falls into disrepair.
7. Will I continue to have an estate that I can leave to my heirs?
When the home is sold, you or your estate will repay the cash received from the reverse mortgage plus interest and fees, to the lender. The remaining equity, if any, belongs to you or to your heirs.
8. How much money can I get?
The amount borrowed depends on:
The age of the youngest borrower
The current interest rate
Appraised value of your home, the sale price or the HECM FHA mortgage limit for your area whichever is less.
Your initial choice for Mortgage Insurance Premium MIP (2% HECM Standard option or .01% HECM Saver option)
More money can be borrowed with the HECM Standard option. The older you are, the more valuable you home and the lower the interest rate, the more you can borrow. In cases of more than one borrower, the youngest borrower’s age is used to determine the amount you can borrow. To estimate your HECM cash benefits, select an online calculator from the HECM Web Page. You can also find one on the AARP website to get an idea of what you can borrow.
9. How do I get my payments?
You have several options:
Tenure: equal monthly payments as long as at least one borrower lives at the principal residence.
Line of Credit – unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
Term: equal monthly payments for a fixed period of months selected.
Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.
10. How can I find our more?
HUD maintains a website detailing reverse mortgages and the HECM program. Visit HUD’s web page at HUD.gov. Also the National Council on Aging at NCOA.ORG has a publication called Using Your Home to Stay at Home that gives detail about the pros and cons of a reverse mortgage.
Article prepared by Omega Mortgage Group of Redding, CA.
Omega Mortgage Group specializes in FHA Reverse Mortgages and other quality Mortgage and Home Loan Solutions. Please contact us if you have questions.
www.omega-mortgage-group.com
800-971-2066 or 530-223-1400
Processing your request, Please wait....
