Reverse Mortgage Loans

What Exactly is a Reverse Mortgage Loan?

 

A reverse mortgage is a loan that enables homeowners and home buyers age 62 or older to convert some of their home equity into cash or a line of credit. Some loans also let homeowners finance a new home purchase. With a reverse mortgage, you make no loan payments. You continue to live in and own your home.


Unlike a traditional home equity loan or home equity line of credit (HELOC), you don't have to repay a reverse mortgage until the home is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home. The homeowners must maintain the condition of the home and stay current with property taxes and hazard insurance.

 

Eligibility Criteria for Reverse Mortgage Loan Application

 

To be eligible for a reverse mortgage, you must meet the following criteria:

  • You must be age 62 or older
  • The home must be the borrowers' primary residence
  • The home must meet Federal Housing Authority (FHA) minimum property standards and flood requirements

The home must be one of the following property types:

  • Single-family home
  • Two to Four unit home with one unit occupied by the borrower
  • HUD approved condominium
  • If you have a new construction, you must have a Certificate of Occupancy or equivalent before you apply

You must have sufficient home equity. A reverse Mortgage Specialist from Verger Mortgage can tell you if you have enough home equity to qualify.

 

Commonly Asked Questions About Reverse Mortgage Loans

 

Will the bank own my home?

No. Just like a traditional mortgage, as long as you continue to meet the loan terms, such as staying current on property taxes, homeowners insurance, and property changes, you retain full ownership.  You can sell the home at any time.


How much money will I get with a reverse mortgage loan?

You will receive a portion of your home equity. How much depends on a number of factors including:

  • The age of the youngest borrower or non-borrowing spouse
  • Your home's value
  • Equity amount
  • FHA lending limits
  • Current interest rate
  • Reverse mortgage product
  • Choice of payment option

A Reverse Mortgage Specialist at Verger Mortgage can provide you with a FREE quote that's tailored to your specific situation.


How will I receive the proceeds?

You can take your funds as a lump sum, a line of credit, or as monthly payments. You can also use a combination of these options.

Will I be spending from my children’s inheritance?

A reverse mortgage may help you maintain a quality standard of living throughout your retirement years. Because a reverse mortgage is a tough decision that may affect other family members, we encourage you to involve them in your decision process.

When the home is sold or is no longer your primary residence, it's time to repay the loan. After the loan is paid off, any remaining equity belongs to you or your estate and can be transferred to heirs.

What are the costs associated with a reverse mortgage?

Up-front costs may include:

  • A property appraisal fee
  • An origination fee
  • Closing costs
  • A mortgage insurance premium
  • A modest HECM counseling charge (if applicable)
  • A servicing fee

You can roll most of the up-front costs into your loan to minimize out-of-pocket expenses. While closing costs may vary based on the type and size of the loan they are similar to those for any traditional mortgage. 

During the loan period, interest and a monthly insurance premium accrue. A Verger Mortgage Reverse Mortgage Specialist will give you a detailed breakdown of the up-front costs and other loan expenses.

When do I have to pay back the loan?

You do not have to make principal and interest payments as long as the home is your primary residence. As long as you meet the loan terms, you do not have to repay a reverse mortgage until the home is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home as their primary residence.

Will this affect my Social Security or Medicare?

Reverse mortgages typically do not impact regular Social Security or Medicare benefits but because programs vary from state to state, be sure to consult a benefits professional before entering into a reverse mortgage.
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