Are reverse mortgages a scam?
The HECM reverse mortgage has been around since 1988. It’s not a new or exotic loan. It is regulated by HUD and insured by the Federal Housing Administration (FHA). The government is not in the business of scamming it’s citizens. In fact there are several other countries around the world that have similar programs including Canada, the UK, Australia, New Zealand and India.
Who gets the house when I die with a reverse mortgage?
Who ever you leave your home to in your will or trust will get the home. Whoever inherited the home will need to decide what to do with it. If they want to keep it, they will need to pay the loan balance off. If they sell it, they will net any equity in the home.
How old do you have to be to do a reverse mortgage?
You must be 62 years old to qualify for a reverse mortgage. If your spouse is younger than 62, they will not be on the loan. However, there are protections in place for eligible non-borrowing spouses to allow them to continue to live the home if they were to predecease you.
Can I get a reverse mortgage if I still owe money on my home?
Yes! Getting a reverse mortgage in order to consolidate your current mortgage into the reverse mortgage is a very common reason to get the loan. This will free you from your monthly mortgage payment. You would still need to pay for your property taxes, homeowners insurance and other property expenses.
How much money do you get from a reverse mortgage?
There are many factors that will determine the amount of money you would have available. These include the age of the youngest borrower, the appraised value of your home and the current interest rates. You can check out out calculator or give me a call for the most accurate quote.
What can I do with the money from a reverse mortgage?
You can use the money for whatever you want. There are no limitations. However, it is frowned upon to use the proceeds to purchase annuities or invest in stock and bonds.
Who owns the house with a reverse mortgage?
You do. You remain on title.
Can I sell my home with a reverse mortgage?
Yes. It’s your home and you are on title. You can sell, refinance into another mortgage (assuming you qualify) or even pay the reverse mortgage off with cash.
Can I remodel or add an addition with a reverse mortgage?
Yes! It is your home. You can remodel, add an addition, build a shop, or do anything else with your home as long as you are not reducing the value of your home.
What happens if the person I did the loan with dies?
Nothing. The loan is still in effect and none of the terms of conditions of the loan change.
Can I leave my home to my kids?
Yes! If your kids want to keep the home they will need to payoff the loan balance. If they sell the home, they will net any equity, if any, less any fees from a real estate agent and title/escrow fees.
Will my heirs be responsible for paying back the reverse mortgage?
Your heirs would only be required to payback the reverse mortgage is they want to keep the home. If they sell it, the reverse mortgage is paid off when the home is sold. They are not required to make payments on the loan.
Can the home be in a trust with a reverse mortgage?
Yes. Your home can be in a trust with a reverse mortgage as long as the trust meets FHA requirements. Trusts will be reviewed during the mortgage process to ensure they meet FHA requirement. If you do not currently have a trust, you put the home into the trust at a later date. Your attorney will need to provide you a letter that you can provide to the servicer of your loan that the trust meets FHA guidelines.
Will Social Security or Medicare be affected?
A reverse mortgage has no impact on regular Social Security or Medicare benefits. However, if you rely on Medicaid or Supplemental Security Income (SSI), or any other means based benefit, a reverse mortgage may affect those benefits. It is best to contact your case worker or someone at those organizations to determine the impact if any.
What happens if I spend all the money on a reverse mortgage?
Nothing. You can continue to live in the home for as long as you are able to do so as long as you are meeting all your loan obligations which mainly consists of paying your property taxes, homeowners insurance, living in it as your primary residence and taking care of the home. You will not be required to make a mortgage if the money is gone.
Can I ever owe more than the home is worth?
Technically on paper, yes, you could own more than the home is worth. However, you nor your heirs, can ever owe more than the home is worth. This is a non-recourse loan, which means the only recourse the lender has is the sale of the home. The sale of the home satisfies the loan regardless of whether you owed more than what it was worth. In other words, the lender cannot pursue you, your heirs or your estate for any losses on the loan.
What happens if the loan balance exceeds my homes value?
Nothing. You would continue to receive payments and have access to all available funds in your line of credit assuming you set up your loan with or both of those options. You would not be required to start making payments
What happens if my home value goes down?
Nothing. You would continue to receive payments and have access to all available funds in your line of credit assuming you set up your loan with either or both of those options. You would not be required to start making payments
How long does a reverse mortgage last?
Technically, the loan lasts until you are 150 years old. Unless there is some sort of modern medical miracle, you will never outlive the reverse mortgage.
Do you have to pay income taxes on the money you get from a reverse mortgage?
No! The proceeds from a reverse mortgage are not considered income. They are loan proceeds and therefore are not taxable. (Consult with a tax professional)
Do you need good credit to get a reverse mortgage?
Not necessarily. Credit scores are not used when qualifying for the loan. However, your credit history is used. Lower credit scores are indicative of making payments late. Do you pay your bills on time including your property taxes and insurance? If you have a history of making payments late, you may be required to set up a LESA. If a LESA is required, you may not have enough equity to qualify.
What is a LESA?
A LESA is a life expectancy set aside. It is basically an escrow account that pays your taxes and insurance for you. It if funded from proceeds from the reverse mortgage. For example, if you have $100,000 in proceeds available, $30,000 would be used to set up your LESA. A LESA could be required or borrowers can also voluntarily set one up as well.
How long does it take to get a reverse mortgage?
Generally it takes 30 to 45 days. It could be longer if there are things that need to be remedied in order to fund the loan such as required home repairs or issues with the title of your home.
How much equity do you need for a reverse mortgage?
This will vary depending on the age of the youngest borrower and current interest rates. Generally, you will need 50% to 65% equity in your home to get a reverse mortgage. If you do not have enough equity, you can pay down the balance with other assets in order to qualify.
Can I have roommates?
Yes, you can have roommates with a reverse mortgage. You can collect rent and all of the rent is yours to keep, after paying taxes.