you heard the latest?
Congress has approved a new law.
And the Reverse Mortgage just got better!
End Monthly Payments
The Reverse Mortgage
a Traditional Refinance Loan the Homeowner borrows a large
amount of money and makes monthly payments. As payments are
made, the loan balance gets smaller and the home's equity
the other hand, with the AARP
endorsed Reverse Mortgage, the Homeowner usually borrows
small amounts, i.e., monthly or at other intervals, through
a line of credit. Over the course of time, the loan balance
gets larger, and the home's equity may become smaller depending
on the state of the economy.
NO MORE MONTHLY MORTGAGE PAYMENTS
of the loan is required only once, at the end of the loan,
which in most cases is when the Homeowner sells the home,
or no longer uses the home as a primary residence for 365
consecutive days, or when the Homeowner passes.
Stay In Your Home With Peace
no income, employment, health, or credit qualifying restrictions.
loan amount is based on age, where the borrower lives, and
the value of the home. The current interest rate is around
5% - 6%. The amount owed can never exceed property value,
so a Reverse Mortgage can never cause you to lose your home.
received during loan term, plus any accrued interest, become
due when the borrower sells or no longer uses the home as
a primary residence.
ALL, NO MORE MONTHLY MORTGAGE PAYMENTS
Access To Extra Income
Mortgage Borrowers May Obtain Loan Proceeds ...
In a lump
sum to cover large expenses.
installments to supplement income.
As a line
of credit to draw on as necessary.
is even a choice for an immediate cash advance in addition
to monthly allotments. And borrowers can change funds distribution
plans as many times as they wish.
Getting Your Reverse Mortgage
Consumer, i.e., senior Homeowner or adult child, learns about
Reverse Mortgages or a particular product from an article,
ad, direct mail, word-of-mouth, Broker, etc.
Consumer seeks more information by contacting a Broker, Lender,
HUD, Fannie Mae, AARP, National Center for Home Equity Conversion,
or Financial Planner.
Consumer is required to participate in a Consumer Education
Session with a HUD approved counselor. This can be done by
phone or in person. The purpose of the session is to explain
the legal and financial considerations of obtaining a Reverse
Mortgage. This session ensures that you understand the program
and your obligations as stated in the loan agreement. Upon
completion, you will be provided with a Certificate of Counseling
which is then given to your Lender as evidence of completion.
The certificate expires 180 days after the session.
- DISCLOSURE Consumer completes the application for Reverse
Mortgage with Lender and selects payment option: fixed monthly
payments for life, fixed monthly payments for term, lump sum
payment, line of credit, or combination of all the options.
Consumer provides Lender with required documents, i.e., photo
identification, verification of Social Security number, copy
of deed to home, home owner's insurance declaration page,
information on any existing mortgage(s) on property, and their
Appraiser prepares appraisal report. If structural problems
are noticed or suspected, physical inspection of home is ordered.
After receiving all pertinent information and data, the Lender
finalizes the loan parameters with Consumer, i.e., payment
options, packages loan, and submits package to underwriting
department for underwriting and final approval.
Following approval, closing (signing) of loan is scheduled.
Initial and expected interest rates are set. These affect
the amount of funds available to Consumer, along with the
age of borrower(s) and value of the home. Closing papers and
final figures are prepared. Closing costs are normally financed
as part of loan. Previous payments, if any, by Consumer for
appraisal may be refunded or used to reduce the closing costs
financed. Lender or title company has Consumer sign loan papers.
Any existing debt on the home is paid off. A new lien is placed
on the home.
OF RESCISSION Consumer has three business days after signing
papers in which to cancel the loan, the "three-day Right
of Rescission". Upon expiration of this period, the loan
is disbursed, Consumer gets access to the funds in the form
of the payment option selected, i.e., monthly checks, etc.
Consumer is not required to make any monthly mortgage payments
to lender during the life of the loan. The Reverse Mortgage
becomes fully repayable upon: a) the death of the borrower
or last co-borrower; b) the sale of the home; c) a permanent
move from the home by the borrower, i.e., to a nursing home,
or another event, after which the home is no longer the borrower’s
principal residence for 365 days in a row. The loan may be
repaid by the borrower or borrower’s heirs-estate, with
or without a sale of the home.
Your Reverse Mortgage
Involves Several Actions
You're Just Six Steps Away
From No Monthly Mortgage Payments
This is the where you are, right now. You are taking the time
to learn about the Reverse Mortgage program to determine if
it is appropriate for your situation.
A counseling session can be done by phone or in person with
a HUD approved counseling agency. The purpose of counseling
is to explain the legal and financial considerations of obtaining
a Reverse Mortgage. Counseling ensures that you understand
the program and your obligations as stated in the loan agreement.
Upon completion you are provided with a Certificate of Counseling,
which is given to your Lender as evidence of completion. The
certificate expires 180 days after the session.
You sit down with the Lender and sign the loan application.
The Lender will disclose the estimated total cost of the loan,
as required by the Federal Truth In Lending Act.
The Lender will order an appraisal of your home, do a title
search and get a payoff value for any outstanding mortgages.
Typically, it takes between 25 and 45 days to process a loan.
Loan documents are signed, including the Mortgage or Deed
You have three business days after closing in which to cancel
the loan, the three day Right of Rescission period. Upon expiration
of this period, the initial draw you selected is usually available
by the 5th day. Monthly payments are usually received at the
beginning of the new month after a 3 week set up period.
Mortgages End Monthly Payments
To Frequently Asked Questions
Am I qualified for a Reverse Mortgage if I currently have
an existing loan on my home?
A. Yes, but the existing loan must be paid off prior to, or
at the settlement of the Reverse Mortgage. Quite often the
Reverse Mortgage is used to refinance an existing loan.
Q. My property is held in a Living Trust. Do I qualify?
A. Yes, but you must be the primary Trustee and qualified
Q. To avoid probate, my children and I own the property
in joint tenancy. Do we qualify?
A. Yes, if the children are age 62 and older and live on the
property. Otherwise, they would need to be taken off the title
for you to participate.
Q. Are the cash advances considered income by the
A. No. The cash advances are actually loan distributions and
are not considered income. The cash advances are tax free.
Q. Are manufactured homes eligible?
A. Yes. The home must have been built in July, 1976 or after
and have a permanent foundation that is approved by FHA.
A structural inspection is required prior to processing of
the Reverse Mortgage. If the home is on leased land certain
additional restrictions can apply -- please ask for a clear
Q. Are there restrictions on how I can use the money?
A. No, after all, it's your money!
What about fees and cost?
A. There are four basic types of charges, other than interest,
involved in setting up a Reverse Mortgage ...
and monthly mortgage insurance premiums, called MIP.
costs, such as appraisal, title research, title insurance,
flood certification, etc.
servicing fee, which is automatically added to the loan balance.
Q. Are these fees payable at closing or added monthly
to the loan balance?
A. Typically, the only out of pocket expense for
participation in the Reverse Mortgage program is the cost
of the appraisal.
What about the interest rate?
A. The borrower does have the option of either a monthly adjusting
rate, an annually adjusting rate or a fixed rate. Rates are
linked to the one year U.S. Treasury Security Rate or the
LIBOR (London Interbank Offered Rate). The change in the interest
rate has no effect on the amount or the number of loan advances
that the borrower can receive, but it does cause the loan
balance to grow at a faster or slower rate.
When is loan repayment due?
A. The loan is due and payable when the borrowers no longer
occupy the property as their principal residence for 365 days
in a row, or if they fail to comply with the loan agreement,
i.e., pay property tax or maintain Homeowner's Insurance.
The loan agreement also states that the borrowers understand
that it is their responsibility to maintain the property in
normal living condition.
The loan must be repaid in one payment, either from the sale
of the home or through other resources. There is no requirement
that the property be sold, only that the loan is repaid, i.e.,
the beneficiaries can get a "forward" mortgage.
What is the effect on public benefits?
A. Loan proceeds are not considered income and will
not affect Social Security or Medicare because these programs
are not based on need. You'll need to check with the benefit
specialist for the Medicaid or SSI programs as certain rules
must be adhered so as not to be disqualified for these types
of public benefit programs.
Q. What is the eligibility requirement?
A. All Homeowners must be age 62 or older and occupy the property
as their principal residence.
The home must be owned free and clear or only a reasonable
remaining balance exists. The Reverse Mortgage may be used
to pay off the balance on an existing loan.
The property must be a single-family, condo, townhouse, or
up to a four-unit dwelling.
How much can be borrowed?
A. Maximum amount that can be borrowed is based on these three
of the youngest Homeowner.
value of the home.
Q. What are Reverse Mortgage Payment Plan options?
A. There are different ways of receiving the loan proceeds.
Homeowners can choose an option that best fits their needs
and goals ...
fixed cash advances for a set period of time.
Provides fixed cash advances for as long as the Homeowners
occupy the property as their principal residence.
Credit: Establishes a credit line which the borrower draws
upon as he or she wishes.
A combination of the above options.