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What is a Reverse Mortgage
A Reverse Mortgage is a federally insured government loan program specifically designed for homeowners age 62 and older. Reverse Mortgages are backed by the Federal Government with all costs and fees regulated by the U.S. Department of Housing and Urban Development (HUD) and managed by the Federal Housing Administration (FHA). In 2014, major legislative changes were implemented to both enhance the program and better protect the homeowner, thus evolving the Reverse Mortgage into one of the safest mortgage products available today.
Features
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash, tax free. Unlike a traditional home equity line or second mortgage, reverse mortgage borrowers do not have to repay the reverse mortgage until:
- The last borrower passes away
- The borrowers no longer occupy the home as their primary residence
- The borrowers fail to meet the obligations of the reverse mortgage which requires the borrower to pay all property taxes, homeowners insurance and homeowners association fees on time.
Benefits
- You continue to own your home
- No monthly mortgage payment is ever required
- Funds are Tax Free
- No limitations on how you can use the funds
- Homeowners keep all future appreciation, no equity sharing
- No pre-payment penalty – make interest payments if you want
Protections
- Non-Borrowing Spouse (less than 62) is protected. The non-borrowing spouse law became effective under the authority of the Reverse Mortgage Stabilization Act effective August 4, 2014. This law allows a non-borrowing spouse to be less than 62 years old. They are not listed on the reverse mortgage as a borrower, but possess non-borrowing spouse rights when they survive the qualifying borrower.
- No Recourse… You can never owe more than the value of your home.
- Mortgage Insurance Premium ensures the amount owed can never be more than the value of the home.
- Education is required… The government and the reverse mortgage industry want to make sure that you have all the information you need to make the right decision. A counseling session can take place either face-to-face or by telephone. The session should generally last about 90 minutes.
- Avoid the RED LINE… Where your money runs out before your retirement does. Recent studies show that a retirees greatest fear is outliving their money, 61% fear outliving their assets more than they feared dying.
Frequently Asked Questions
- How do we get access to our funds if we choose a Monthly Payment or Credit Line distribution?
- You will notify your loan servicer to arrange for access to your funds.
- You will notify your loan servicer to arrange for access to your funds.
- How long does this process take
- Approximately 4-6 weeks, depending on how quickly you are able to provide all the required documentation.
- Approximately 4-6 weeks, depending on how quickly you are able to provide all the required documentation.
- Who is responsible for my annual Taxes and Insurance?
- Just like your current mortgage, you as the homeowner will continue to be responsible for your taxes and insurance payments.
- Can I setup a Tax and Insurance Impound/Escrow account?
- Once your loan has closed, we can assist you in the setup of an impound/escrow account.
- Once your loan has closed, we can assist you in the setup of an impound/escrow account.
- What happens if I take a really long trip?
- No problem at all, enjoy yourself. Each year you will be required to sign a Verification of Occupancy Statement confirming that the property address listed in your reverse mortgage is still your primary residence.
- No problem at all, enjoy yourself. Each year you will be required to sign a Verification of Occupancy Statement confirming that the property address listed in your reverse mortgage is still your primary residence.
- When do I receive my monthly distributions?
- First business day of the month.
- First business day of the month.
- How long after I pass away do my kids have to refinance or sell the home?
- One of the many great features of your Reverse Mortgage is that the surviving spouse can remain in their residence and continue to not make any mortgage payments as long as all property taxes, insurance and HOA dues are kept current each year. Once both homeowners no longer reside in the home, the industry standard is 6 months with possible extensions granted.