FREQUENTLY ASKED QUESTIONS
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Q. What is a Reverse Mortgage?
A. An FHA reverse mortgage (HECM loan), is a government insured loan. It is a financial tool that allows you to access the equity in your home and convert it into cash or an ever-growing line of credit.
Q. How does it work?
A. You are not obligated to make any monthly mortgage payments. From your equity, you receive a monthly income, a lump sum, a growing line of credit or a combination. This allows you to live in the home as long as you wish without making monthly payments. Once you vacate or sell the property, the proceeds from the sale pay off the loan and you retain any remaining equity. Your only obligations are to continue to pay property taxes and insurance, and keep the home in good condition.
Q. How much money do I qualify for?
A. That depends upon these factors: - Starting age is 60 and older. Your home’s appraised value - Your current mortgage balance
Q. Will I still own my home?
A. Yes. In this regard a reverse mortgage is no different than any mortgage loan. As with any mortgage loan, as long as you pay your taxes and insurance, and comply with all loan terms, you retain ownership of your home.
Q. Am I qualified for a HECM Loan if I currently have an existing loan on my home?
A. Yes, this is very common. We pay off the existing loan with money from your HECM Loan when you get your HECM loan.
Q. My property is held in a Living Trust. Do I qualify?
A. Yes, as long as you are the primary trustee and are qualified by age.
Q. To avoid probate, my children and I own the property in joint tenancy. Do we qualify?
A. Yes, if the executor of the trust is age 60 or older and lives in the property. Otherwise, you may wish to consult a trust attorney to look at other ways to avoid probate.
Q. Does the IRS consider the monthly advances from the HECM as income?
A. No. The cash advances are actually loan distributions and are not considered income. The cash advances are tax-free
Q. Are mobile homes eligible?
A. Yes. The home must have been built in 1977 or later; you must own the land under the home and have a permanent foundation that is approved by FHA.
Q. My spouse is permanently in a nursing home. Can we participate?
A. Yes. The requirement is only that one owner occupy the property as a principal residence.
Q. Are there restrictions on how I can use the money?
A. No. Of course not – it’s your money.
Q. What are the qualifications for a reverse mortgage?
A. You must be 60 years and older, own your home and occupy it as your primary residence.
Q. How do I receive my funds?
A. Funds can be wired to your bank account.
Q. What are some of the benefits of a reverse mortgage?
A. You can never owe more than the value of your home. As long as you live in the home, and comply with the loan terms, you will never have to make a mortgage payment. You will not lose Social Security or Medicare benefits. You achieve greater financial freedom and security. You can have peace of mind and stay in your home as long as you wish. You can utilize tax-free cash for any purpose. You will eliminate your current mortgage payment. You can purchase a new home and have no monthly payments. You can supplement your retirement income making your retirement funds go farther. You can opt to make monthly payments to use less of your equity.
Q. Is a reverse mortgage a last resort option only?
A. No. This is a huge misconception. A reverse mortgage can be a very powerful and intelligent strategic financial planning tool. It offers supplemental retirement income and helps manage retirement risks.
Q. What if my home increases in value over time?
A. If that happens, your equity increases and you may have more cash available to you.
Q. Reverse Mortgages are non-recourse loans. What is a non-recourse loan?
A. The non-recourse feature is one of the most powerful aspects of a reverse mortgage. It means that the homeowner is not responsible for the mortgage debt that might accrue beyond the home’s value. This gives homeowners peace of mind that they will not be leaving debt to their heirs. If the homeowner lives a long and full life, or property values drastically drop, and the reverse mortgage balance exceeds the value of the property, no one is responsible for the amount above the value of the house. FHA guarantees that neither the borrower nor their heirs will owe more than the home is worth at the time it is sold.
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