What is a reverse mortgage........?

Question

What if the house is paid off...........

Answer 1

This is a frequently asked questions that I send all my clients. Please feel free to contact me if you have any more questions. Our company can do loans in almost every state and we are the largest originator of reverse mortgages in the southwest.

What is a reverse mortgage?

A reverse mortgage is an FHA-insured loan on the equity in your home, but you never pay it back as long as you live in your home.

Who qualifies?

Anyone at least 62 years of age who owns a home qualifies.

Does the home have to be paid off?

No. Many people purchase a reverse mortgage to pay off their current mortgage.

How much money will I receive?

An appraiser will come out and determine the market value of your home. You will then receive somewhere between 45% - 75% of the appraised value of your home. The older you are, the higher percentage you will receive.

How long does it take to receive the money?

Normally, it takes 5-6 weeks to complete a reverse mortgage.

Do I receive the money from the reverse mortgage in a lump sum, or in monthly payments?

You can receive the money any way you wish: in a lump sum; in monthly payments for as long as you live in your home; or, you can take out a partial lump sum, with the rest to be paid monthly. You can also get your money in a line of credit and withdraw the money whenever you need it. The great thing about the line of credit is that you are only charged interest on what you withdraw. The balance is not charged interest rather it grows currently around 7% a year.

Do we pay closing costs?

You pay nothing, at any time, out of your pocket. The closing costs are rolled into the loan, so they are paid out of the equity in your home, but you don’t bring any money to closing.

How is the reverse mortgage paid back?

After you pass away, the home is left to your heirs (your children, or grandchildren). They can either sell the home, which will pay off the mortgage, and they will receive the remaining money; or, if they want to live in the home, they will simply take out a refinance mortgage.

Will any money be left in the home for my kids when I pass away?

There should be quite a bit of money left for them. The reason the reverse mortgage only pays you from 45% - 75% of the home’s value is because the program is set up so there will be plenty of equity left in the home for your heirs when you pass away. The interest rates on reverse mortgages are extremely low (they ranged between 5% - 6% during the past year), and they are set up that way so the value in your home should increase more each year than the loan increases due to the interest.

So, does the equity grow in my home after I take out a reverse mortgage?

Yes. Since the interest on the reverse mortgage is so low, your home’s equity should increase each year. Nationally, home prices increase about 4% a year on average. In the metroplex, homes have been increasing 8.5% during the past 8 years. If your home increases only 4% (the national average) the equity in your home will double in 16 years, even with a reverse mortgage loan. So, your children, or heirs, should inherit plenty of money after they sell the home and the mortgage is paid off.

Will that still apply if interest rates become quite high?

If interest rates increase dramatically, that means inflation is high, therefore, your home’s value will be greatly increasing, as well. So, your home’s equity should continue to grow each year, whether interest rates are low, or high.

If I pass away first, does my spouse have to sell the home?

No, as long as either of you are living in the home, the reverse mortgage doesn’t need to be paid.

How does the bank make their money?

They make their money on the interest which gradually accumulates on the loan. Therefore, they have to wait until you pass away before they receive any money.

Do my heirs have to sell the home immediately after I pass away?

The bank gives them 6 months to sell the home. If the home is still not sold, the bank will continue to provide your heirs with 3 month extensions until the home is sold.

How can I be sure that the bank won’t try to take away my home from me?

The reverse mortgage is a government-run program, so it is insured by FHA to make sure that the mortgage never changes, and that neither you, nor your heirs, will ever get stuck paying a bill. Also, the longer you live in your home, the more money the bank will eventually make on the reverse mortgage, so they want you living there for many years.

Can I get a reverse mortgage on my rental home?

No, a reverse mortgage can only be taken out on your homestead.

Will I continue to pay for my homeowner’s insurance, and taxes?

Yes, those will be your only responsibilities.

Can I ever sell my home?

Yes, you can sell at any time. You would simply sell your home for the market price, this will pay off your reverse mortgage, and you will receive the remaining money. So, in essence, it would be as if you are receiving some of the money out of your home now by taking out a reverse mortgage, and you will receive the rest of the money when you sell the home.

My home needs repairs. Will I need to fix my home before I can get a reverse mortgage?

No. The appraiser will determine if any structural damage will need to be repaired in your home. Cosmetic repairs are not of any concern to the appraiser. If a repair is needed, you will simply have to provide an estimate to the bank, and the work can be usually done after you receive your money. The bank will put aside some money for the repairs, out of your proceeds, so they can pay the repairman after he finishes his job. This helps so you won’t have to pay anything out of pocket for repairs.

How can I be sure I will receive a good appraisal for my home?

We use independent appraisers, so we are not bound to any single appraiser. We will ask the appraiser for a realistic appraisal price, and if he doesn’t feel he can get that price, we go to another appraiser. We are fair, but we also strive to get you the top dollar price possible for your home. This will insure you will receive as much money from the reverse mortgage as possible.

Can another company, or bank, give me a better deal?

Since the reverse mortgage is run through the government, the interest rate is the same for everyone, and the fees paid by the bank are also the same for everyone.

How much money do you receive as the broker?

We receive the national standard of $2,000, or 2% of the home’s value if it is appraised for over $100,000. This pays me, our boss, the loan processor, our secretary, as well as paying our rent and office expenses, so it is chopped up into many pieces.

Do I pay this money to you?

You do not pay us directly, so you bring nothing to the closing table. This fee is paid by the bank up front. It is paid out of the equity in your home, but it is not paid out of your pocket.

How long have reverse mortgage been in existence?

They started in 1987 in other parts of the country. Texas was the last state to permit them, in 2001.

Which bank will provide my reverse mortgage?

Financial Freedom Senior Funding Corporation in Atlanta, Georgia. They were opened in 1989 just to do reverse mortgages. Today, that is still all they do as they have become the experts in this field. They handle about 80% of the reverse mortgages in the country.

Can I receive more money from an equity loan?

Possibly, if you qualify; however, you will have a monthly mortgage payment. Also, many senior citizens don’t qualify for an equity loan, at least not a large equity loan, because of their fixed incomes. Anyone at least 62 years of age who is considering an equity loan, should really take out a reverse mortgage, which is an equity loan you don’t pay back.

So, I receive between 45% - 75% of my home’s appraised value; I never pay any fees out of my pocket; I can live in my home for the rest of my life; I make no house payments; and my children inherit my home? This sounds too good to be true. Are there any drawbacks to the reverse mortgage?

The only drawback is that your heirs will not receive the total value of your home when you pass away. However, as mentioned previously, their will still be plenty of equity left in your home when you pass away, so they will receive a handsome check after selling your home. Other than that, there is no real drawback to a reverse mortgage.

Answer 2

It is getting a loan on the equity in your house but instead of getting a lump sum they give you monthly payments.

Example: House is worth $200,000
existing mtg $ 75,000
Equity $125,000

You apply for a reverse mortgage. The mortgage company will send you a check for $400 each month for 15 years. at the end of the 15 years you owe them $116,327 (assuming an interest rate of 6%). Sometimes they will roll the existing mortgage into the reverse mortgage so you would have no payments, just a check each month.

The bad part of this is at the end of the 15 years what do you do?
You either sell the house or refinance and start making payments.

Answer 3

It's for the senior citizen. What happens is that the company will mortgage the house and give the owner the proceeds (senior citizen) in either the form of a lump sum payment or as monthly income. When the person dies (or moves) the house is sold and the proceeds go to pay off the reverse mortgage. Any overages are given to the senior citizen or their estate if they've passed away.

Answer 4

A mortgage product for people who own their own home. Basically, the owner is paid a monthy payment by the company that takes over the mortgage. They will guarantee the owner a monthly payment while they have a right to live in the house as long as they live. Once they die, the mortgage company owns the house. Good for retirees without much savings except for their home. It is a gamble. If they live many years, it is a great deal. If they don't, the bank wins.
If the home is owned, I would recommend selling and moving to a rental condo or apartment, while living off the investment proceeds.

Answer 5

A reverse mortgage is where the mtg company will make payments to you (like an annuity) against the equity in your home for a period of time. At the end, the mortgage co will be paid from the proceeds of the sale of the home. Used a lot by retired people to supplement their incomes.

Answer 6

A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment.

The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Eligible property types include single-family homes, manufactured homes (built after June 1976), qualified condominiums, and townhouses

Answer 7

A simple explanation: A lender gives you either a lump sum or monthly payments in exchange for a lien on your property. I am not sure what the age requirements but there will be a minimum age and you will need to own the home without any liens otherwise those liens would have to be cleared beforehand.

When the homeowner dies, the property reverts to the lender as payment or the estate can redeem it by paying the mortgage off in some way.

Answer 8

Not a hundred percent sure but it something like the bank buying your house back from you for x number of dollars per month for x number of years. If you live longer than x number of years they kick you out on your *** and sell the house. I've heard it's not a good idea but everyones circumstances are different I suppose.

Answer 9

Top Ten Things to Know if You're Interested in a Reverse Mortgage

Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (HUD) created one of the first. HUD's Reverse Mortgage is a federally-insured private loan, and it's a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements, and more. You can receive free information about reverse mortgages by calling AARP at: 1-800-569-4287, toll-free. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you!

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.

2. Can I qualify for a HUD reverse mortgage?

To be eligible for a HUD reverse mortgage, HUD's Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

4. What types of homes are eligible?

Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

5. What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

6. Can the lender take my home away if I outlive the loan?

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

9. Should I use an estate planning service to find a reverse mortgage?

I've been contacted by a firm that will give me the name of a lender for a "small percentage" of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:


Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term - equal monthly payments for a fixed period of months selected.
Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.
Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.


This calculator provides approximate estimates for two nationally available reverse mortgage programs. These estimates do not reflect local cost variables, are not an offer to make you a loan, do not qualify you to obtain a loan, and are not an official loan disclosure. AARP does not endorse any specific reverse mortgage product or lender.

How much cash could you get? To find out, go the this link: Reverse Mortgage Calculator
http://www.rmaarp.com/


www.hud.gov