What is a Reverse Mortgage
Looking for a reverse mortgage? If you are a homeowner or home buyer 62 years or older, you may be able to take advantage of a reverse mortgage to turn some of your existing home equity into cash or a line of credit. Some reverse mortgage loans, allow you to finance a new home purchase. With a reverse mortgage, you won’t have to make loan payments and you’ll continue to live in and own your home!
Unlike normal home equity loans or home equity lines of credit (HELOC), you don’t have to pay back your reverse mortgage right away. Unless the property is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives on the property, you aren’t responsible for payments. You just have to stay current with property taxes, maintain the condition of the property, and stay up to date with insurance.
Am I Eligible for a Reverse Mortgage?
Everyone’s situation is unique, and there are some rules when it comes to getting a reverse mortgage. If you want a reverse mortgage, you must meet the following criteria:
- You must be 62 years of age or older.
- The property also must be the borrower’s primary residence.
- The property needs to meet Federal Housing Authority (FHA) minimum requirements and flood requirements.
- The property must be either a single-family home, a two-to-four-unit property with an owner-occupied unit, or a HUD-approved condo.
- With new construction, you must have a Certificate of Occupancy or equivalent before you apply.
- And, as the borrower, you must have sufficient home equity.
Not Sure If You Qualify?
Get in touch with us today. CB Loans can help determine if you qualify for a reverse mortgage.
Need Help Getting a Reverse Mortgage?
We here at CB Loans are reverse mortgage experts. We pride ourselves on our ability of not only knowing the ins-and-outs of the mortgage business, but our commitment to you the client. We’ll guide you through the process, keeping you informed and giving you peace of mind through every step of the process. Contact us today.
Why Choose a Reverse Mortgage?There are so many financial options out there. So, why do so many people choose to take out a reverse mortgage?
In short, a reverse mortgage lets you eliminate your monthly mortgage payments while still owning and living in your home. It can allow you to access your home equity before you’ve paid off the property. Plus, it can increase your spending power and give you financial security after retirement.
Improve Your Finances Now
Everyone wants to improve their immediate finances! A reverse mortgage gives you access to tax-free money that you can use for any purpose: whether you want to save it, use it for home improvements, take a trip, pay for medical expenses or your kids’ college expenses.
Tailor Your Reverse Mortgage to Your Needs
Every borrower is unique, so thankfully, you can use your reverse mortgage in a way that works for you. You can use a reverse mortgage to stay afloat if you’re struggling financially, or you can simply use it to grow your income.
Don’t Worry About Income Requirements or Credit Score
Many homeowners are able to get a reverse mortgage even if their income and credit score is less than excellent. The New Financial Assessment Rules simply require that you’re able to pay your taxes and insurance.
Don’t Worry About Defaulting
Home equity loans come with a risk of defaulting (or becoming unable to pay off the loan.) However, a reverse mortgage cannot be taken from you because there are no payments on the loan. You just have to make sure to pay for upkeep, insurance, and taxes.
Grow or Preserve Your Finances
Perhaps your financial advisor suggested a reverse mortgage or home equity conversion mortgage (HECM) as a financial planning tool. You can use these options to maximize your wealth and maintain your home value if the market goes down.
Remain Federally Insured and Tax Free
Home equity conversion mortgages are managed by the Department of Housing and Urban Affairs, so they are insured by the federal government. Even if your lender defaults, you’ll still receive payments. And, your payments are typically tax-free.
Stay In Your Home
You’ll remain a homeowner when you get a reverse mortgage or home equity conversion mortgage (HECM). You’ll have a guaranteed residence for as long as you want to remain in the home, but you can also sell at any time.
Choose from Payment Options
In most cases, you can choose the way you want to receive your reverse mortgage loan money. You can get it via monthly payments, a lump sum, a line of credit, or a combination of these options.
Ten Things To KnowIt’s important to be informed about your finances! Here’s what you need to know about reverse mortgages and Home Equity Conversion Mortgage (HECM).
- Choose an Experienced Lender
Not all lenders are created equal, so we recommend you go with an experienced, knowledgeable lender. This helps the process go more smoothly and efficiently.
- Get Advice from Financial Pros
Don’t rely on the advice of friends, family, or the internet. Ask a knowledgeable pro before getting a reverse mortgage or HECM. As everyone’s situation is different, a reverse mortgage may or may not be ideal for you.
- Be Aware of Consumer Protections
Some financial products have better protections than others. The government requires that all reverse mortgages and HECM lenders operate under strict guidelines, giving consumers protection against fraud. To get these protections, you must use an approved lender and make sure your loan is FHA-insured.
- Make Sure Your Lender is Trustworthy
Choose a lender with a good reputation in the industry. You need to be comfortable talking with them and confident that they’re answering your questions thoroughly. You’re making important financial decisions, and you don’t want to be led astray.
- Find Out About Any Credit Score or Income Requirements
Usually, the income and credit score requirements for a reverse mortgage are forgiving. This is a great advantage! However, that doesn’t mean that everyone is eligible. You still need to demonstrate the ability to pay for maintenance, taxes, and insurance.
- Know the Benefits and Risks of a Reverse Mortgage/HECM
There are several benefits to a reverse mortgage, including increased spending power, sustained homeownership, and financial flexibility. In some cases, there may be risk involved, such as if you may become unable to pay maintenance, taxes, or insurance.
- Learn About Drawing Funds
With a reverse mortgage or HECM, you can draw from a certain amount of available funds. You may be able to draw money as a lump sum, a monthly payment, a line of credit, or a combination of these methods. If you do not draw money, it will remain as equity in your home. When you draw funds, you don’t need to pay equity or interest until you (or your heirs) sell the property. Upon the sale of the property, all the equity you drew—and the interest accrued—will be subtracted from the sales proceeds.
- Ensure All Fees and Costs are Fully Disclosed to You
It is required that all fees and costs associated with your HECM or reverse mortgage are fully disclosed to you. So, make sure you are aware of these fees, whether they are upfront or recurring.
- Be Sure to Keep Property Taxes and Insurance Current
While you don’t have to pay monthly mortgage bills with a reverse mortgage/HECM, you are required to pay your property taxes and insurance on the property. And, if it’s a condo or townhouse, you need to keep HOA fees current.
- Keep Your Home Well-Maintained
You don’t want to lose eligibility for homeowner’s insurance, because that could have disastrous effects on your reverse mortgage or HECM. Stay up to date on routine maintenance and keep your home in good repair.
FAQsHere are some of the most commonly asked questions about reverse mortgage loans.
Will I own my home, or will the bank own it?
You will own your home. Whether you’re a current homeowner or buying a new house, your reverse mortgage will work just like a traditional mortgage in that you retain full ownership. You can sell whenever you want. You just have to stay up to date on homeowners insurance, property taxes, and any HOA fees that may apply.
How much money will I be able to get?
It all depends on your home value, the amount of equity, the current interest rate, FHA lending limits, the age of the borrower or spouse, and the specific reverse mortgage options you choose. Your CB Loans reverse mortgage specialist will give you a free quote tailored to your situation!
How will I get the money from my reverse mortgage?
There are a few options: monthly payments, a lump sum, or line of credit. Or, you can get a combination of those options. Choose the option that works best for your specific situation.
Does it cost money to get a reverse mortgage?
There may be a few upfront costs which can vary depending on the specific situation: property appraisal, origination fee, mortgage insurance premium, closing costs, and (sometimes) a charge for HECM counseling. However, it’s usually easy to roll these costs into the loan if you can’t spend money out of pocket.
And, there might be some recurring costs during the life of the loan. Your interest and monthly insurance premium accrue over time. Your CB Loans reverse mortgage specialist can give you all the information you need to know about loan expenses and upfront costs.
Will a reverse mortgage affect my Social Security or Medicare?
Most of the time, reverse mortgages and HECMs do not impact Social Security or Medicare benefits. However, programs can vary from state to state. Make sure to consult a benefits professional before you get a reverse mortgage.
Am I spending my heirs’ money?
Once again, it all depends on your situation. The important thing right now is that you maintain a quality standard of living through your retirement years. If you manage your money well, there will be money left over after the home is sold and the loan is paid off. Then, the remaining equity belongs to you or your estate and it can be given to your heirs upon your passing. Since this may affect your children or other heirs, we always encourage people to involve heirs in the decision process when considering a reverse mortgage.
When will I pay back the loan?
As long as the property is your primary residence, you won’t have to make principal or interest payments. And as long as you continue to meet the loan terms, you won’t have to repay the reverse mortgage until you sell the home, move away, or pass away. When the home is sold, the mortgage will be repaid.