Reverse Mortgages
What is a Reverse Mortgage?
A Reverse Mortgage is a federally regulated program for homeowners, aged 62 and older. It allows the equity in your home to pay you rather than you paying for the home.
What is a Government Insured HECM program?
HECM stands for Home Equity Conversion Mortgage. It is a federally insured and guaranteed program. The HECM is a safe way for seniors to access the equity in their home without ever making a mortgage payment.
How is this program “safe” for Senior Homeowners?
No matter what happens in the economy, how much money you receive, or how long you live in your home…you will never be required to make a mortgage payment. In addition, no matter what happens to the lender or your home’s value, you have guaranteed access to your money.
Who owns the home if I take a Reverse Mortgage?
Senior citizen still owns the home. However, the home is pledged as collateral.
What happens in the future if the Loan exceeds the Value of the Home?
The Reverse Mortgage will continue – thanks to the federal insurance. The line of credit is also still available, and monthly disbursements that are initially set-up will still be sent. Also, reverse mortgages are ‘Non-recourse’ which means any outstanding loan balance that may potentially exceed future property value will never be owed by heirs.
How are Reverse Mortgages different today?
Today’s reverse mortgages are highly regulated by State and Federal laws to make them safe and to protect seniors. Among others, the following regulations apply:
– Senior citizen retains title of the home.
– No equity share is allowed, meaning the lender does not slowly take over the home.
– Fees and costs are federally regulated.
How does a Reverse Mortgage compare to a Conventional Mortgage?
In a conventional forward mortgage, you make monthly payments to the bank eventually paying off the mortgage over time. With a reverse mortgage, the senior receives cash from the lender as a lump sum upfront, as monthly installments, or as a line of credit that grows over time. As long as the senior citizen lives in the home, they never have to pay off a single dollar of the loan.
What restrictions apply to the cash received from a Reverse Mortgage?
It’s the senior’s money, and they can use it for any purpose. It’s also non-taxable and does not affect Social Security payments. It’s recommended the senior talk to a competent financial advisor to determine the effect on any other benefits they may be receiving.
When does a Reverse Mortgage become due and what happens then?
When the senior no longer lives in the home or when they pass away, the reverse mortgage will become due. The senior citizen or their heirs have two options:
1) Pay off the reverse mortgage including the accrued interest and retain ownership .
2) Give up ownership of the home and receive the difference between the net sales proceeds and the loan balance. Senior home owner will not be liable for any shortfall if the sales proceeds do not cover the loan.
*Heirs are still entitled to equity after senior homeowner passes, as long as reverse mortgage is paid-off, which can be done through the sale of property or refinance.
**The reverse loan may also become due and payable if senior home owner does not continue meeting the terms of the loan (For example, paying taxes and insurance owed on the property).
What are the obligations under a Reverse Mortgage?
With a Reverse Mortgage, senior home owner retains title to the home. This means they will be responsible for all of the obligations as a home owner. Senior home owners are still responsible for annual property taxes and insurances.
Contact Dave Kevelighan for Reverse Mortgages and pricing today!
