Frequently Asked Questions
Taking a reverse mortgage loan is a big decision. It’s normal for you and your family to have questions and hopefully the answers below can help put your mind at ease. If you don’t see your question, feel free to call one of our Reverse Mortgage Advisors. They’re highly knowledgeable and here to offer impartial advice. When you’re ready to apply, they’ll work with you through every step of the process.
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Question and Answers about Reverse Mortgage Loans
What is a reverse mortgage loan?
A reverse mortgage is a loan that allows you to access a portion of the home equity and convert it into tax-free retirement income. With this type of loan, you maintain the title to your home and no repayment is required until the loan is due. The loan typically becomes due when the last borrower(s) permanently leave the home. When the loan becomes due, the borrower will never owe more than the appraised value of the home provided it is sold.
If no monthly payments are required, how is my reverse mortgage loan paid back?
To pay off the loan balance, you or your heirs can sell the home, use other sources of funding or use funds from a new mortgage.
How do I qualify for a reverse mortgage loan?
To qualify, you must be age 62 or older and be the titleholder to your home. In addition you must have a fair amount of equity in your home.
What if I have an existing mortgage?
If you currently have a mortgage, that’s okay. However, a portion of the funds you receive from your reverse mortgage loan (or funds from another source) must be used to pay off any existing mortgage you have on the property at closing.
Is my home eligible?
Your home must be a single-family residence in a 1- to 4-unit dwelling, or a FHA-approved condominium.
Will I still own my home or will I lose it?
You will still own your home and you can stay in it for as long as you wish, provided you pay your taxes, insurance and maintain the home according to FHA requirements.
Are there property and insurance requirements?
Since you still own your home with a reverse mortgage loan you’re responsible for the general maintenance and upkeep as well as for paying all ongoing property taxes and insurance. You can often pay for these expenses with funds from your reverse mortgage loan.
What types of loans are available?
All of our loans are Home Equity Conversion Mortgages (HECM). Always ask to see a comparison of various loans so you have a complete understanding of what is available. Your Reverse Mortgage Advisor can objectively help you decide which of our federally insured products best fit your needs.
How much of my home’s equity can I access with a reverse mortgage loan?
The loan amounts vary based on which reverse mortgage loan product you choose. Quite simply, the amount you can receive depends on the age of the youngest borrower, current interest rates, and the lesser of the appraised value of your home or FHA maximum lending limit. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you may be able to borrow.
How can I use the money?
The money you receive from your reverse mortgage loan can be used any way you choose, from making ends meet, medical expenses (including in-home care), and home improvement to travel, pampering your grand kids and living your retirement dreams. There are no limitations or restrictions, once you receive the net proceeds.
What costs are involved with a reverse mortgage loan?
As with any loan, there are closing and other costs, all of which can often be paid with the funds generated by your reverse mortgage loan, resulting in no out-of-pocket costs to you.
Will I have to pay any taxes?
No, the money you receive is considered loan proceeds rather than income, it is tax-free.
Will this loan affect my Social Security or Medicare benefits?
HECM reverse mortgage loan payments typically do not affect your Social Security or Medicare benefits. However, regulations vary for the Federal Supplemental Security Income program and for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps. We suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how HECM payments may affect your particular situation.
How will I receive the available funds?
The most common way is to draw from a line of credit to use at your discretion. However, you may also choose to receive a single lump sum, regular monthly installments, or any combination of these options.
Will my family or estate ever owe more than the value of my home?
No. With a federally-insured reverse mortgage loan you’ll never owe more than the appraised value of your home when the loan matures, so long as the home is sold to repay the loan.
What if I want to leave our home to the kids?
You can still leave it to your children, or to anyone you choose. When the loan becomes due, you or your heirs will have to repay the amount owed. However, you or your heirs will always have the option of paying off the entire balance and keeping the home (which can be done by refinancing with a standard mortgage or by using other funds) or by selling the home to pay off the balance. In any case, the amount of the loan can never exceed the value of the home when the loan is due, provided the home is sold to repay the loan.
Will I incur any penalties if I decide to pay back the loan early?
No. You can pay back the loan at any time without the worry of being penalized.