Reverse Mortgage Q & A
What is a reverse mortgage?
A reverse mortgage is a special type of home loan that turns the equity in a home into cash. Congress saw a need for
seniors to be able to use the equity in their homes – and still live in their homes as long as possible. If qualiﬁed, the equity
that has been building up can be paid out in either monthly installments, one lump sum, or as a line-of-credit.
Can you get a reverse mortgage?
The basic requirements are:
· You must own your own home
· You must be 62 or older
· You have a good amount of equity built up in your home
Do all residences qualify?
Your primary residence is the only home eligible for a reverse mortgage,
it just ﬁts
and you must be living in your home to qualify. Homes that are eligible for
a reverse mortgage are the same as with a regular mortgage including:
· Single-family homes
· Most condominiums
· Manufactured Homes
· 1-4 Family owner-occupied residences
What can you do with the money?
You can put the money toward any expense you have-there are no limitations. But as with any home loan, it’s smart to use
it where you need it most: Medical bills, home repairs, in-home care, balancing the cost of living, gifts to
children/grandchildren, or a more comfortable lifestyle.
What payment options are available?
· A lump-sum upfront payment
· A line of credit (most common)
· Monthly payments for as long as you live in your home or for a pre-determined, shorter time frame
· A combination of monthly income and a line of credit
How much will you qualify for?
The amount of money is based on the qualiﬁcations: age, home’s current value, and equity built up. Other factors are
payment option selected.
How much does it cost?
Many of the same costs you would ﬁnd when you get a regular home loan also apply to reverse mortgages. Fees you might
see are: origination, mortgage insurance, appraisal and closing costs.
When does the loan get paid back?
As long as you are living in your home, you won’t make house payments. When you no longer occupy the home as your
principal residence, the loan becomes due – that includes selling the house, moving out permanently or if you die the
amount due will be the total funds received from the mortgage, the initial fees and closing costs ﬁnanced as part of the
loan, plus accrued interest.
Selling the home isn’t the only option for repayment. You, your children, or heirs always have the option of paying off the
loan and keeping the house.
Reverse Mortgage Q & A
What are the beneﬁts?
· Tax-free funds for as long as you live in the home
· No loan repayment for as long as you live in the home
· No concern about making monthly payments
· A variety of payment options
· No restrictions on how the money is used
Reverse mortgages offer:
· Access to extra income
Receive monthly payments instead of making them. Reﬁnance your home without repaying the debt for as long as
you live there.
· Flexible Qualifying Guidelines
There are no income, employment or credit qualifying restrictions.
· Payment Disbursement Options
You can secure your loan proceeds in a lump sum to cover large expenses, in monthly installments to supplement
your income, or as a line of credit to draw on, as you need it.
· Principal or interest payments are not due monthly
These payments are not due until you move, sell the home or die, provided all program requirements are met.
· Peace of Mind
You can never exceed your property value, so your Reverse Mortgage can never cause you to lose your home.
Before securing a reverse mortgage, you are required to receive independent counseling from a certiﬁed, HUD-approved
counselor. After training, you will receive an eligibility certiﬁcate that proves you have attended the mandatory training.
This is for your safety, and to make sure you are in the right position for a reverse mortgage.
Can the lender take the house or can I lose the house?
With a reverse mortgage, you retain the title to the home throughout the life of the reverse mortgage. You cannot, as a
result of the reverse mortgage, be forced out of your home, as long as property charges, such as taxes and insurance, are
paid and the home is maintained in reasonable living condition.
Once you permanently move out of the home, the loan must be repaid. Most properties secured by reverse mortgages still
have equity when a maturity event occurs. Therefore, you or your heirs may choose to sell the home to repay the loan and
preserve the equity for the beneﬁt of your estate.
Must the home be paid off or debt-free to qualify for a reverse mortgage?
Reverse mortgages convert home equity into cash. As long as there is sufﬁcient equity in the property, you may be eligible
for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate
a required monthly mortgage payment.
When a reverse mortgage becomes due, does the lender sell the home?
You are in control of the home and retain the title, not the lender. So, while it’s common for the borrower or the heirs to sell
the home to repay the loan, it’s a decision you or your heirs make. You or your heirs might also reﬁnance the home in order
to repay the loan.
Would it be cheaper to move to a smaller house?
While this strategy might be right for different reasons, analyze your costs carefully before making this assumption. Make
sure that all the costs involved in selling and moving to a new home are taken into consideration.
Reverse Mortgage Q & A
Will the proceeds from a reverse mortgage impact Social Security and Medicaid beneﬁts?
A reverse mortgage will generally not affect regular Social Security payments or Medicaid beneﬁts. It is recommended
that if you are interested in reverse mortgages, you seek advice from your ﬁnancial advisor and appropriate governmental
Are there restrictions on how the money is used?
There are no restrictions. If you are interested in reverse mortgages you are advised to seek advice from your ﬁnancial
advisor prior to spending the money.
Will taxes need to be paid once the proceeds are received?
The cash proceeds from a reverse mortgage are tax-free because it is already
Are reverse mortgages only for seniors in need, or for the house poor?
The reverse mortgage is an excellent ﬁnancial planning tool that has been used by homeowners from all walks of life to
enhance their retirement years. Many are using reverse mortgages as part of their estate with the advice from ﬁnancial
Go ahead and