What is a reverse mortgage?
A reverse mortgage is a special type of loan that lets homeowners who are at least 62 years old convert a portion of the equity of their home into cash without having to sell their homes, give up your property's title, or take out a new mortgage.
What are the requirements to qualify for a reverse mortgage?
To qualify for a reverse mortgage, you must:
· Be a homeowner who is at least 62 years of age or older
· Use this home as your principal residence
· Own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the loan
· Have the financial resources to pay ongoing property charges including taxes and insurance
· Receive counseling from a HUD-certified agency prior to obtaining the loan
· Take off from the property's title all co-owners who are younger than 62 years old
What types of homes are eligible?
· Single family homes
· 2-4 unit homes with one unit occupied by the borrower
· HUD-approved condominiums and manufactured homes that meet FHA requirements
How do I receive my payments?
For adjustable interest rate mortgages, you can select one of the following payment plans:
· 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 an amount of your choosing until the line of credit is exhausted.
· Modified Tenure - combination of line of credit and scheduled monthly payments for as long as you remain in the home.
· Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment.
What can I use the loan proceeds for?
There are no restrictions. The following are some possible uses:
· To pay for medical expenses or prescriptions
· Supplement retirement income
· Repair or expand principal residence
· Pay for grandkids' education
· Visit friends and relatives
· Purchase recreational vehicles
· Start a new business
· Pay off current mortgage or consumer debts
The sky is the limit in how you decide to use the money obtained from a reverse mortgage.
When does the loan become due and payable?
You or your heirs will need to pay back a reverse mortgage in any of the following situations:
· Last surviving borrower dies, sells the home, or "permanently" (lives somewhere else for one continuous year) moves out
· Borrowers fail to pay property taxes or homeowners insurance
· Borrowers fail to maintain property in good repair
Who holds the title of my property while there is an outstanding balance on the reverse mortgage?
You hold the title to your property as long as the Reverse Mortgage is still in place, just like in a traditional mortgage.
Does my property need to be appraised in order for me to get a reverse mortgage?
Yes. Since the value of your property is an important factor in determining how much money you may obtain through a reverse mortgage, an appraisal is compulsory. The mortgage lender usually, requests the appraisal, which is paid by the client upon submitting an application. Some creditors may defray this cost.
What if I want to get a reverse mortgage but there are heirs to the property?
If there are heirs to the property, they must surrender or sell their part so that you become its sole owner. You may then continue the loan process and use the proceeds to pay each heir their part.
What happens when the last surviving borrower dies and the bank contacts the heirs?
As soon as the last surviving borrower dies, the bank will ask the heirs if they want to keep the property, in which case they will need to pay the bank the balance due on the reverse mortgage. If the heirs decide not to keep it, they will need to sell the property, pay the bank the balance due and keep any remaining profit (if any). If the outstanding loan balance is greater than the property's appraised value at the time, the heirs will not be responsible for the difference – FHA would cover any difference, as the reverse mortgage is a nonrecourse debt (a loan that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable).
What is the maximum amount up to which the debt may increase?
There is no maximum. The total debt owed on a reverse mortgage will be the sum of all money received plus all of the interest that accrued after the loan was closed.
Where can I obtain more information about this loan?
CONSUMER has certified Reverse Mortgage counselors who can explain to you the pros and cons of this product, its financial implications for you and your heirs, its costs, as well as other options that you might consider in addition to a Reverse Mortgage. For an appointment, you may reach us at (787) 722-8835 or 1-800-717-2227. If you wish to start an online session you may do so now.