Frequently Asked Questions on Reverse Mortgage
Q. What is a Reverse Mortgage?
A. A Reverse Mortgage is a federally-insured program for homeowners of at least 62 years of age. There are no income or credit requirements and the program allow homeowners to access the equity in their home without having to make a mortgage payment.
Q. Can my home be taken from me?
A. No. The house remains in your name and you only repay the lender the loan balance or home value.
Q. If I don't have payments, what are my responsibilities as a borrower?
A. Your responsibilities include paying your property taxes and property insurance, maintain your home and notify your lender if you plan on being away from your home for an extended period of time.
Q. How does a Reverse Mortgage affect my heirs?
A. The remaining home equity is preserved for your heirs to inherit (depending on how long you participate in the program). When the loan balance is repaid, the remaining equity stays with your estate and can thus, be passed onto your heirs.
Q. What if I have a current mortgage on my home?
A. Any existing mortgages will be paid off at closing. The proceeds from the reverse mortgage pay the remaining mortgage balance.
Q. What fees are associated with a Reverse Mortgage?
A. Reverse Mortgage fees can be included in your loan balance. Some of the types of fees included are the origination fee, appraisal, credit report, and title examination. All closing costs should be provided to you in a detailed Good Faith Estimate (GFE) at the time of application. Additionally, HUD/FHA charges a 2% mortgage insurance premium on the HECM loan.
Q. When does the loan become due and payable?
A. The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away. There are no payments to the lender until these events take place.
Q. What is due when the loan is repaid?
A. The borrower will pay back the financed closing costs, the amount used to pay off any mortgage payment at the time of closing, any cash amounts received during the term of the loan plus accumulated interest.
Q. Do I or my heirs have to sell the property to repay the loan?
A. No, the Reverse Mortgage can be refinanced by a conventional mortgage loan, or your heirs may use other financial means for repayment (e.g.: life insurance proceeds or refinancing) and keep the home in the family, that is their choice. Your remaining assets are completely protected and cannot be touched, even if you have no equity remaining in the home when you die.
Q. What happens if one of the joint borrowers dies?
A. The surviving borrower receives the same monthly income or access to the remaining funds in the line of credit. That borrower can continue to receive funds from the line of credit until those funds are exhausted.
Q. What about a home in a “living trust”?
A home in a living trust can usually take out a reverse mortgage (subject to documentation review).
Q, What happens if I want to sell my home or move?
The loan balance will need to be repaid in full if you decide to sell your home or permanently move ("all borrowers are absent from the home for more than 12 consecutive months).If there is equity in the home at time of sale, then you will decide what you wish to do with the equity. FHA will pay the mortgage company any deficit on your behalf and you will never have to use other assets to repay the loan.
Q. Why do I need to get counseling?
A. This is the most important consumer protection built into the program and ensures that you fully understand the program, what it details and that you have had a chance to review alternative options before applying for the Reverse Mortgage loan. Ask your Mortgage Specialist for a list of HUD approved counceling agencies.
Still have some questions about the Reverse Mortgage program?
Call or
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