Top 10 Questions to ask if a Reverse Mortgage is right for you?
1 What is a Reverse Mortgage?
A Reverse Mortgage is a unique loan that allows homeowners 62 years of age and older to draw on the equity in their homes. The unique aspect of this loan is that it does not require repayment until the homeowner(s) no longer reside in the property as their primary residence. Created by the US Department of Housing and Urban Development (HUD), this federally insured private loan goes to help those in the Senior population meet their financial needs and ease money worries for greater peace of mind, and a better lifestyle.
2 Is my home eligible for a Reverse Mortgage?
Eligible homes are single family residences, detached homes, townhouses, and two to four unit properties that are owner occupied. Condominiums must be FHA approved to qualify.
3 Should I choose a Reverse Mortgage or a Bank’s Home Equity Loan?
Reverse Mortgages are so popular because they pay you cash that does not have to be repaid as long as you remain in your home. On the other hand, Home Equity Loans, requires you to make payments each month. They require you to qualify based on your disposable income, and your total monthly debts.
4 How much cash can you get?
The cash you can potentially receive is based on your date of birth, the current interest rate, and the appraised value of your property or the FHA’s mortgage limits in your area. For example, the older the person is, with a higher valued home will receive more than a younger person with a lower priced home.
5 Can I outlive this loan?
No. If one of the borrowers lives in the home and continues to pay the taxes and insurance, there is no repayment due the bank. Only when both borrowers vacate the premises, does the loan comes due.
6 What if I currently have a first mortgage on my property?
Any mortgage amount due on the property will be paid off first by the proceeds of the Reverse Mortgage. If the balance is greater than the proceeds of the Reverse Mortgage, the borrower can pay off the difference using his own funds at closing. Sometimes this is preferable than continuing to make monthly payments in your mortgage each month. Do the math to see if it’s advantageous to use your cash.
7 Do I have to pay taxes on the money I receive?
No. The cash you receive is not subject to individual income taxes. Also, the interest which accrues on your Reverse Mortgage is not deductible on your income tax returns because you have not actually paid them yet. Only when the loan is paid off are they deductible.
8 How will a Reverse Mortgage affect my estate and how much will be left for my heirs?
Once the last surviving borrower passes, sell the home, or no longer resides as the primary residence, you or your estate is responsible for repayment of the money received plus interest and fees. Any remaining equity belongs to you or your heirs. HECM Reverse Mortgage insured by the FHA are “non recourse loans”, which actually insures that you, your estate or your heirs, will never owe more than the value of the property when the loan becomes due and is repaid.
9 What are my responsibilities?
You are responsible for paying your own Real Estate Taxes each year, along with your homeowner’s insurance policy, and of maintaining the property in good condition.
10 Am I selling my property to the Bank for the amount of the Reverse Mortgage?
No. You retain title to your home. A Reverse Mortgage is nothing more than a mortgage. You can sell your home at any time you wish. You can do upgrades, renovations, anything you want to your home. You do not need permission from anyone to do what you would ordinarily do to your home with a regular mortgage. And, you can even refinance your reverse mortgage if the value increases and you qualify for additional money from the then current equity in your home.
George Lagarde, your Reverse Mortgage Consultant
Reverse Mortgage Consultant
Bio: I have been in the Mortgage business for the past 31 years and also in the real estate business as a licensed broker for 41 years. Moved to the Las Vegas area six years ago, I am very familiar with the market and its many quirks. I love helping people find the loan that suits them best, and there's nothing more rewarding to me than a satisfied customer.