Reverse Mortgage - Frequently Asked Questions

What is a Reverse Mortgage?

A Reverse Mortgage is a special type of non-recourse loan that allows a senior homeowner to convert a portion of the equity in his/her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. Most reverse mortgages are also federally-insured.

Can I qualify for a Reverse Mortgage?

You may be eligible for a Reverse Mortgage if you and any other current owners of your home are 62 years old or over and the home is your primary reisdence. Professional Mortgage Partners offers certain Reverse Mortgages for homeowners age 60 and up.

What are the Benefits of a Reverse Mortgage?

• Tax-free funds for as long as you live in your home
  
• No loan repayment for as long as you live in your home
  
• No income, medical or credit requirements
  
• Retain ownership of your home for life; this is guaranteed as long as you maintain your home, and pay insurance and real estate taxes
  
• Choose a cash flow plan tailored to your needs
  
• No restrictions on how you may use the funds
  
• A tax-advantaged way to pass on part of your estate today

What makes it a "reverse" mortgage?

A Reverse Mortgage is exactly what its name implies, a loan whose features make it essentially the reverse of a traditional “forward” mortgage. Instead of paying your lender, your lender pays you. Instead of reducing your debt as the loan term progresses, you increase it. Instead of turning your income into equity, you turn your equity into income.
That last feature, the ability to turn your equity into income, is what most distinguishes a Reverse Mortgage from other loans, and it’s what makes it so valuable to many senior homeowners.

What types of homes are eligible?

Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved.

What's the difference between a Reverse Mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The Reverse Mortgage is different in that it pays you and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and home owners insurance, but with an FHA-insured Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you missed a payment.

Can the lender take my home away if I outlive the loan?

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.

Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence due to relocation or death, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by a reverse mortgage loan. This debt will never be passed along to the estate or heirs.

How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow.

How do I receive my payments?

Depending on the product, you have five options:

• 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
  
  
• Line of Credit - unscheduled payments or installments in amounts of borrower’s choosing until the line of credit is exhausted.
  
  
• Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
  
  
• Modified Term - combination of line of credit with monthly payments for a fixed period of months.
  

Is there only one kind of Reverse Mortgage?

No. In fact, there are several types of Reverse Mortgages that can affect the cost of the loan, the total amount of the loan, and even how you’re able to spend the money you receive. Your Reverse Mortgage specialist understands all the rules for each and can help you determine which type would be most beneficial for you.

I’m interested, but I have more questions. Who can I talk to?

Before getting a Reverse Mortgage, you will have the opportunity to speak with an independent Reverse Mortgage counselor. Your counselor will answer any questions you have, inform you about other alternative options for your unique situation, and help you decide if a Reverse Mortgage is right for you, and if so which type would be the best fit for your needs.

What are the costs involved?

The only costs to get started include a small, one-time application fee which covers the cost of a professional home appraisal. The long-term costs of a Reverse Mortgage are similar to a traditional mortgage, including interest charges, origination fees, closing costs, and insurance. These costs can simply be added to your loan balance.

My house is not paid off yet. Can I still get a Reverse Mortgage?

Yes! You can either pay off the old debt before you get a reverse mortgage, or you can use the initial proceeds from the reverse mortgage to pay the debt.

If I get a reverse mortgage, does the bank own my house?

Absolutely not. With a reverse mortgage you still own your home. Of course, that means you must continue to pay your property taxes, make necessary repairs to the home, and keep home-owner’s insurance.

Will my children be responsible for repayment of the Reverse Mortgage?

No. A Reverse Mortgage is what is called a non-recourse loan. This means the bank can never come after any person or estate for repayment of the loan. The bank can only use the value of the home as repayment.

Are there any restrictions I need to be aware of?

After you close your reverse mortgage, you still have a chance to reconsider. Should you decide for any reason that you no longer want the loan, you have three days to cancel.

FAQ for children & heirs

Some potential reverse mortgage candidates are concerned they will have less home equity to leave their heirs, until they actually speak with their heirs. Many adult children want to see their parents live comfortably and enjoy their retirement rather than struggle just to leave something behind when they die. Besides, a Reverse Mortgage can actually grant seniors the freedom to help their children and grandchildren with expenses while they are still alive to see them enjoy it. And don’t forget, heirs will still receive the remaining equity after the loan is repaid.

Here are some things to consider when a loved one is thinking about a Reverse Mortgage.

• They never owe more than the value of their home because a Reverse Mortgage is a non-recourse loan (debt is only against the home).
• Debt is never transferred to heirs, which makes Reverse Mortgages an excellent financial and estate planning tool.
• The loan is repaid when the borrower sells or passes away.
• Any remaining equity after repayment of the loan belongs to the homeowner or estate.

Frequently Asked Questions

Did You Know?

U.S. Government Insured

A government-insured Reverse Mortgage was created to allow homeowners age 62 and older the opportunity to supplement their monthly income by unlocking the equity in their homes. Although there are a few different organizations issuing Reverse Mortgages: the Federal Housing Administration (a division of the U.S. Housing and Urban Development department), Fannie Mae, and a small number of private corporations, 95% of all Reverse Mortgage loans are Home Equity Conversion Mortgages (HECMs), which means they are completely backed by the federal government. Your Reverse Mortgage Loan Specialist will explain the details of each organization's products and help you decide which one best meets your family's needs.

Government Required Counseling

To ensure senior homeowners understand all aspects of a Reverse Mortgage, the government requires you undergo an independent, unbiased counseling session with a U.S. Housing and Urban Development (HUD) approved counselor. This meeting can be done in person or over the phone. After speaking with the HUD counselor, your loan consultant can submit the paperwork and begin to process the application.

The History of Reverse Mortgages

Since the first Reverse Mortgage loan was issued in 1961, usage of this powerful financial tool has steadily risen throughout the decades. Today, more Reverse Mortgage loans are obtained than ever before. The U.S. Department of Housing & Urban Development (HUD) endorsed over 100,000 Reverse Mortgages last year.