Frequently Asked Questions about a Reverse Mortgage
A reverse mortgage is a safe, reliable way to access your home’s equity. Convert your home equity into cash without selling your house, giving up ownership or taking on a new monthly mortgage payment. You can use the money for immediate expenses, a rainy day fund or to plan that vacation you’ve always dreamed of taking.
A reverse mortgage is a unique FHA-Insured loan that enables older homeowners to convert a part of the equity in their home into cash without having to sell the house, give up ownership, or take on a new monthly mortgage payment. (Notice: Homeowners are required to continue to pay all property charges such as insurance, taxes, HOA fees, etc.)
Ownership doesn’t change in this transaction as you are only using your home as collateral for the loan. While this is a common misconception, it’s important to know that your responsibility is to continue to pay property charges (ie: insurance(s), taxes, HOA, etc.) as well as routine upkeep/maintenance. You remain the titled owner of the home.
First of all the loan can be paid back at any time without any prepayment penalty. To pay off the loan balance, you or your heirs can sell the home, refinance, or pay it off with other assets.
To qualify you must be the titled owner, age 62 or older, and have sufficient equity in your home as well as pass current credit and income criteria as established by the Department of Housing and Urban Development (HUD).
Your home must be one of the following: single-family residence, 2 to 4 unit dwelling where you live as primary residence in one of the units, an FHA-approved condo, or a manufactured home that meets FHA requirements.
After closing costs and any mortgages or liens are paid off, the amount remaining is available for you to use as needed. This could be a lump sum to help consolidate other debts, monthly supplemental cash, line of credit for future needs, or a combination of all.
As with any mortgage, there are closing costs involved; such as origination fee, attorney/settlement fees, appraisal, credit, etc. However most fees can be financed into the loan, therefore limiting the out of pocket costs.
You can still leave your home to your children or heirs. When the loan becomes due , your or your heirs have the option of paying off the full balance of the loan and keeping the house.
