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 Reverse Mortgage Facts A
SAFE GOVERNMENT PROGRAM
TAX FREE INCOME NO REPAYMENT UNLESS YOU MOVE OR SELL RETAIN FULL OWNERSHIP USE CASH FOR ANYTHING YOU WANT OK - WITH SOCIAL SECURITY & MEDICARE MUST BE 62 OR OLDER NO INCOME OR CREDIT REQUIREMENTS
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Frequently Asked Questions - Reverse Mortgages Clicking a Question will take you directly to the answer. What
locations are you licensed in?
A. We
are licensed in all states except Georgia. Q. How does a Reverse Mortgage differ from a home equity loan? A. While
both Reverse Mortgages and home equity loans enable you to turn the equity
in your home into spendable dollars, there are important differences between
the two types of mortgages. With a home equity loan, you must make regular
monthly payments to repay the loan. These payments begin as soon as the
loan is originated. To qualify for such a loan, you must earn a monthly
income great enough to make those payments. If you fail to make the monthly
payments, the mortgage lender can foreclose on you, and you can be forced
to sell your home. In addition, you may be required to re-qualify for
a home equity loan each year. If you do not re-qualify, the lender may
require you to pay the loan in full immediately. With a Reverse Mortgage,
you do not repay the loan as long as your home remains the principal residence,
your income is not considered when qualifying you for the loan, and there
is no requirement that you re-qualify each year. Q. Who is eligible for a Reverse Mortgage? A. You, and
any co-borrowers, must be at least 62 years old and either own your home
free and clear or have an outstanding mortgage balance that can be paid
off at loan closing using the reverse mortgage loan proceeds or combination
of reverse mortgage loan proceeds and additional borrower funds at closing.
Your home most be a single-family or two- to four-unit dwelling. Condominiums
maybe eligible if they are in FHA-approved developments or can become
approved. You also must agree to accept mortgage counseling from a HUD-approved
counseling agency. Family members also are strongly encouraged to attend
these counseling sessions. Q. What are the minimum and maximum amounts that I can borrow? A. The maximum
amount you can borrow is based on a HUD formula that factors in the age
of the youngest borrower, the interest rate, and the maximum claim amount.
The maximum claim amount is the lesser of the appraised value of your
house or the maximum principal amount for a one family residence that
can be insured by FHA in your area. The maximum mortgage amount insured
by FHA varies by geographic area and changes frequently. Q. What types of payment plans are available with the Reverse Mortgage loan? A. A borrower with a Reverse Mortgage may choose among five payment options: Term, tenure, modified term, modified tenure, and line of credit. Under the Term option, you may receive equal monthly payments for a fixed period of time selected by you. Under the Tenure option, you may receive equal monthly payments for as long as you occupy the home as a principal residence. Under the Line Of Credit option, you may draw up to a maximum amount of cash at times and in the amounts of your choosing, as you occupy the home as a principal residence. Under the Modified Tenure plan allows you to set aside a portion of loan proceeds as a line of credit and receive the rest in the form of equal monthly payments as long as you occupy your home as a principal residence. The Modified Term plan allows you to set aside a portion of loan proceeds as a line of credit and receive the balance as equal monthly payments for a fixed time period as specified by you. If you select
either of the term plans, you can remain in your home after the end of
the loan term without starting repayment. The same is true if you have
withdrawn the maximum amount under a line of credit or tenure payment
plan. Remember, repayment of a Reverse Mortgage does not begin until you
no longer occupy your home as your principal residence. Q. How will the amount of the monthly payment be calculated? A. How much
you can receive in monthly payments on the age of the youngest borrower,
the interest rate, the maximum claim amount, and the length of time that
you will be receiving payments--for a fixed period or for as long as you
live in the house. The older you are the larger your payments are likely
to be. Q. Will Reverse Mortgage payments affect my Social Security, Medicare, Supplement Security Income (SSI), or Medical benefits? A. Reverse Mortgage payments do not affect your Social Security or Medicare benefits because those benefits are not based on the assets of the recipient. However, in the Federal Supplement Security Income Program beneficiaries must keep their liquid resources under certain limits. If you do not spend Reverse Mortgage advances in the month received, then such funds are considered part of your liquid resources and may adversely affect your eligibility for SSI. Therefore, a Reverse Mortgage borrower who also receives SSI should never draw more money than actually need to spend that month. Regulations
for state-administrated programs such as Medicaid, AFDC, Food Stamps,
and for state-funded welfare programs (such as state supplements to SSI)
all have different eligibility requirements. Therefore, we suggest that
you consult a benefits specialist at your local Area Agency on Aging or
the local offices for these programs to determine how Reverse Mortgage
payments may affect your particular situation. Q. Will I have to pay any fees to obtain a Reverse Mortgage? A. Yes, you will have to pay an origination fee, other closing costs, and a mortgage insurance premium, which is divided into two parts: an upfront premium of two percent of the maximum claim amount, and annual, ongoing fee of half percent on your mortgage balance. You may be able to finance the origination fee, other closing costs, and the upfront two percent mortgage insurance premium--that is, these items may be included in your loan balance so you do not have to pay for them in cash. In addition to the yearly insurance premium, a servicing fee is charged to your loan balance each month. Back to List of Questions about Reverse Morgages Q. Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home? A. Absolutely
not, as long as you continue to occupy the property as a principal residence.
You can not be forced to sell or vacate the property, even if the total
of the mortgage payments to you plus interest and mortgage insurance premiums
exceeds the value of the property or if the fixed term over which you
received your payments has expired. No deficiency judgment may result
from your Reverse Mortgage loan. FHA insurance covers any further financial
obligation to the lender. Q. Will my Heirs owe anything to the mortgage lender if I die? A. Upon your
death, the loan balance, consisting of payments made to you on your behalf
plus accrued interest, becomes due and payable. Your heirs may repay the
loan by selling the home or by paying off the Reverse Mortgage loan so
that they may keep the home. If the loan exceeds the value of your property,
your heirs will owe no more then the value of the property. FHA insurance
will cover any balance due to the lender. No additional financial claims
may be made against your heirs or estate. Q. If my home appreciates in value during the mortgage term, who will be entitled to that money? A. Under
a Reverse Mortgage you are legally required to pay back to the lender
only the outstanding balance. Any money remaining after the mortgage is
paid goes to you or, upon your death, to your heirs. Q. What if I decide to sell my home? A. If you
choose to sell your home, the outstanding loan balance becomes due and
payable to the mortgage lender. You or your estate will receive any proceeds
exceeding the loan balance. Q. Can I sell my home to my children and continue to live in it? A. If you sell your home to your children or any other individual, the loan balance will be due and payable at settlement. After the loan is repaid, any arrangements for your continued occupancy of the property must be made with the new owners.
Q. What is Fannie Mae's role in the Reverse Mortgage program? A. Fannie
Mae has agreed to purchase two types of adjustable-rate HECM loans from
the lenders who originated them. One adjustable-rate mortgage (ARM) plan
features annual interest rate adjustments with a two percent cap on the
amount that the interest may change at each adjustment and a five percent
cap on increases or decreases over the life of the loan. The other ARM
plan features monthly interest rate changes and limits interest rate increase
to a ten percent over the life of the loan.
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