Below are many of the common questions we receive regarding Reverse Mortgages (click the question to view the answer). We are always available to answer your questions. Please call or email us with any questions you may have. (303) 771-3528.gem04

What is a Reverse Mortgage?
A Reverse Mortgage is designed to benefit homeowners age 62 or older who are looking for a way to tap their home equity without having to pay back the loan while they still live in their home providing the home is not sold, taxes are paid, and homeowners insurance is current. With a Reverse Mortgage, you borrow against the value of your home, and receive loan proceeds according to the payment plan that you select. It can provide the maximum amount of flexibility to address your particular financial needs - whether it is a lump sum to pay an unexpected hospital bill, or a stream of regular payments to supplement your monthly income. Unlike traditional home equity loans, no repayment of the loan is required until you no longer occupy the home as your principal residence. If you sell your home or move, proceeds from the sale of your home are first used to repay the lender then any remaining equity is yours. When you pass on any remaining equity in the home passes to your estate or heirs.
Who is eligible for a Reverse Mortgage?
You must own a home, be at least 62, and have enough equity in your home. There are no medical requirements.

Sometime in 2014, lenders will start conducting financial assessments of every reverse mortgage borrower to make sure you have the financial capacyt to continue paying mandatory obligations, such as property taxes and homeowner's insurance, as stipulated in the Loan Agreement. Lenders will analyze all income sources - including pensions, Social Security, IRAs and 401(k) plans - as well as your credit history. They will look closely at how much money is left over after paying typical living expenses.

If a lender determines that you may not be able to keep up with property taxes and homeowner's insurance payments, they will be authorized to set aside a certain amount of funds from the loan to pay future charges.
Would I be eligible for a Reverse Mortgage if I am over 62 years old and my spouse isn't 62 yet?
The borrower who is 62 or older is eligible to apply for a reverse mortgage, but the younger spouse can not be on the loan. In this case, the spouse would be considered a "Non-Borrowing Spouse". If you and the "Non-Borrowing Spouse" meet certain important conditions outlined below, the due and payable status of reverse mortgages will be deferred during the period of time following the death of the last surviving borrower.

In order for the Deferral Period to apply to an identified Non-Borrowing Spouse, the identified Non-Borrowing Spouse must:
1. Have been the spouse of a HECM borrower at the time of loan closing and have remained the spouse of such HECM borrower for the duration of the HECM borrower's lifetime;
2. Have been properly disclosed to the Lender at origination and specifically identified and named as a Non-Borrowing Spouse in the HECM documents; and
3. Have occupied, and continue to occupy, the property securing the HECM as the Principal Residence of the identified Non-Borrowing Spouse.

DURING A DEFERRAL PERIOD, LOAN ADVANCES CANNOT AND WILL NOT BE MADE TO A NON-BORROWING SPOUSE. THE NON-BORROWING SPOUSE WILL HAVE CERTAIN OBLIGATIONS AND DUTIES IN ORDER TO REMAIN ELIGIBLE TO STAY IN THE HOME.
Does my home qualify?
Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (see qualifications here), HUD-approved condominiums, and townhouses. Co-ops do not qualify.
Will Reverse Mortgage payments affect my Social Security, Medicare, Supplemental Security Income (SSI), or Medicaid benefits?
Reverse Mortgage payments do not affect your Social Security or Medicare benefits because they are not based on the assets of the recipient. However, in the federal SSI program, beneficiaries must keep their liquid resources under certain limits. With Reverse Mortgages, you can choose to suspend your monthly payments for a specified period. You may wish to exercise this option if you receive SSI or Medicaid payments, do not have an immediate need for the loan funds, and are concerned about failing the SSI asset test. Regulations vary for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps. Therefore, we suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how Reverse Mortgage payments may affect your particular financial situation.
Will I have to pay any fees to obtain a Reverse Mortgage?
Fees and costs are federally regulated. Typically the only out-of-pocket fees you will have to pay is for the appraisal and counseling if you select an agency that does charge a fee. The other fees are rolled into the reverse mortgage loan. If the closing costs are financed the amount of the available loan will be reduced.
Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
No. As long as you continue to occupy the property as your principal residence, maintain the property, and pay your property taxes and insurance, you can stay in your home for as long as you choose. No deficiency judgment may result from your Reverse Mortgage loan.
Will my heirs owe anything to the mortgage lender if I die?
Upon your death, the loan balance, consisting of payments made to you or on your behalf plus accrued interest and mortgage insurance, becomes due and payable. Your heirs may repay the loan balance by selling the home or by paying off the Reverse Mortgage loan so that they may keep the home. If the loan balance exceeds the value of the property when home is sold all proceeds will go to the lender. There is no "negative balance" which may be charged to your heirs or estate. No additional financial claims may be made against your heirs or the estate.
If my home appreciates in value during the mortgage term, who will be entitled to that money?
By law, the lender is only entitled to the outstanding balance on the Reverse Mortgage. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.
What if I decide to sell my home?
If you choose to sell your home, it works like a normal sale... you choose the realtor, etc. The outstanding loan balance becomes due and payable to the mortgage lender. You can pay the loan balance with proceeds from the sale of your home, and you or your estate will receive any proceeds exceeding the loan balance.
How much money can I borrow?
The maximum amount you can borrow (the principal limit) is based on three factors: the expected interest rate, the age of the youngest borrower, and the adjusted property value. The adjusted property value is the lesser of the appraised value of your home or the particular loan program's limit. Your principal limit is determined at the time you apply for your loan and you will be aware of that figure. Also, the more valuable your home is, the older you are, and the lower the interest rate, the more you can borrow. If there is more than one borrower, the age of the youngest borrower is used to determine the amount you can borrow.
What payment plans are available?
In most states, a borrower may choose among up to five payment options depending on the loan program chosen. You may change payment plans at any time, and as often as you like, for a small fee.
  • Tenure: You receive a monthly check for as long as you live in the home.
  • Line of Credit: You can draw up to a maximum amount at the times and in the amounts of the your choosing. The unused balance on your line of credit may continue to grow in value to you depending on the type of reverse mortgage you choose.
  • Lump Sum Cash Advance: A lump sum of cash distributed to you at closing.
  • Term: You receive a defined amount each month for a specified term. This is useful if the you want or need more cash each month and/or do not expect to remain in your home for the rest of your life. When the defined term is up, the payments will stop however the loan is still not due until the you cease to occupy the home as your primary residence.
  • Modified: You may opt to receive funds in a combination of the above options.
No matter which payment plan you select, with your Reverse Mortgage you will have the security of knowing that repayment is not required until you no longer live in your home-as long as you abide by your agreement with your lender to pay your taxes and insurance and to maintain your property.
How is the monthly payment I receive determined?
If you elect the tenure or modified tenure option, the amount of money paid to you is determined by considering the following factors: your principal limit (the amount of cash available to you as a borrower) and the length of time you are expected to remain in your home, based on life expectancy. The older you are, the larger your payments are likely to be.
Can I sell my home to my children and continue to live in it?
If you sell your home to your children or any other individual, the Reverse Mortgage will become due and payable at settlement. After the loan is repaid, any arrangement for your continued occupancy of the property must be made with the new owners.
What are some of my responsibilities as a homeowner with a reverse mortgage?
To keep your real estate taxes and homeowners insurance current, and to properly maintain your home so that it's value does not diminish.
Can I purchase a new home using a Reverse Mortgage?
Some Reverse Mortgage loan programs can be used by persons 62 years of age or older to purchase a new or existing home ultimately eliminating monthly mortgage payments. One exception to home purchase is the HECM reverse mortgage. The loan combines features of a home purchase mortgage and a Reverse Mortgage into one easy step, giving you instant access to your home equity. In most instances, this loan is used by homeowners who want to sell their current home and buy another one that suits their needs. The lender will use the purchase price of the new home, age of the youngest borrower, the expected interest rate and the current lender's loan limit to determine your eligible principal limit. Depending on the purchase price of the home, you may be required to apply part of your own funds toward the purchase and cost of closing.
Am I spending my children's inheritance?
Your heirs will get less inheiritance. They are entitled to any appreciation the property accrues after repayment of the loan. Additionally, a Reverse Mortgage offers the freedom to assist your children financially today and avoid the potential of burdening them with your expenses.
Given the recent mortgage crisis how do I know a reverse mortgage is safe?
Most Reverse Mortgages are insured by the Federal Housing Administration. These are called Home Equity Conversion Mortgages or HECMs. The insurance is paid via a small monthly fee and upfront fee which are rolled into the loan. This means that, should the lender holding your Reverse Mortgage fail, the Federal Government would either take over the loan or find another investor to assume it. The effect would be transparent to you. This applies only to a HECM.

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