Is a Reverse Mortgage Right for Me?

A Reverse Mortgage isn't for everyone. The following questions may help you ascertain if it's for you:

• Are you looking to stay in your home for the     foreseeable future?

• Do you have equity built up in your home?

• Would extra money each month enable you to do     the things you want to do?

If you answered "Yes" to the above questions, then perhaps a Reverse Mortgage might be an option worth your consideration. One of the common concerns about getting a Reverse Mortgage is the concern for your heirs. Discuss your ideas about a Reverse Mortgage with your family and trusted advisors. Perhaps there are other options that will work better than a Reverse Mortgage.

F.H.A.  &  H.U.D. insure two types of Reverse Mortgages: FHA Monthly and FHA Annual.
The FHA H.E.C.M. (Home Equity Conversion Mortgage) is by far the most popular Reverse Mortgage (administered through the U.S. Department of Housing and Urban Development - HUD). The line of credit option accounts for approximately 60% of all Reverse Mortgages. 

What types of homes qualify for a Reverse Mortgage?
Single family homes, 2-4 unit dwellings, townhouses, detached homes, condominiums, and most manufactured homes are eligible for Reverse Mortgages. Condominiums must be FHA-approved. Co-ops may also qualify for a Reverse Mortgage, but the co-op board must approve of the Reverse Mortgage and the bank and title company must review the co-op documents. Mobile homes are generally not eligible for a Reverse Mortgage.

Would a "living trust" be eligible for a Reverse Mortgage? What about a Life Estate?
In most cases a homeowner who has put his or her home into a revocable living trust can take out a Reverse Mortgage. Life Estates are acceptable for Reverse Mortgages as well as Power of Attorney and Guardianship. The Reverse Mortgage Lender must review and approve these documents as part of the loan process.

Are there any restrictions on the use of funds with a Reverse Mortgage?
No! You can use the proceeds of a Reverse Mortgage any way you like. You can help a family member, travel, pay bills, fix up the house, pay off your mortgage, etc.

If I choose a line of credit, does the bank pay me interest on the unused portion?
No. The lender does not pay interest on a Reverse Mortgage. However, the lender provides a Credit Line Growth rate (a percentage) on the unused line of credit. With the FHA H.E.C.M. (Home Equity Conversion Mortgage), you receive a growth rate of 0.5% (1/2 %) over the current interest rate that accrues on your loan.
Over the life of the loan, credit is given for the home appreciating in value, and the borrower's age is taken into account over time. NOTE: Fannie Mae Reverse Mortgages, largely used for home purchases, do not provide a growth rate on the unused line of credit.

Reverse Mortgages are gaining popularity simply because they fulfill a need. 112,154 Reverse Mortgages have been closed in 2008 thus far. Click here for FHA HECM production statistics. (1990-2008).

You Remain On Title - The lender does NOT own your home. Just as with any mortgage on your home, you retain the title as the owner, not the bank.

Reverse Mortgages & Equity Loans - Similar, But Different - Although a Reverse Mortgages is a lot like an Equity Loan, there are some significant differences. (a) With a Reverse Mortgage, your credit rating is not a determining factor. (b) Unlike an equity loan, you make no monthly mortgage payments! (c) With an Equity loan, you would have to refinance to increase your line of credit. With a Reverse Mortgage, your unused line of credit increases year to year giving you access to more equity and more money without the need to refinance. (Again, with the FHA HECM, your unused credit line grows .5% higher than the current interest rate.)

Can I owe more than my home is worth? A Reverse Mortgage is a "non-recourse" loan. The house stands for the debt. You can never owe more than your home is worth even if your home value is less than what is owed the lender. Mortgage insurance, required by FHA, protects borrowers from owing more than the value of the home.

If I decide to do a Reverse Mortgage, wlll there be an inspection of my home?
Yes, there will be an inspection of your home (known as an appraisal). Your home, inside and outside, will be evaluated to determine its value.

How long does it take to close my Reverse Mortgage?
It generally takes 30-45 days to close a Reverse Mortgage. It can take more or less time. Co-ops take longer, and any application with special circumstances involves more care and can take longer.

What happens at the closing?
Mortgage documents are signed at closing. If you have a current mortgage, it will be paid by your new Reverse Mortgage. You receive your funds (if cash out was chosen) after the three day right of rescission (right to cancel) period is over. Click here for more info.

When is the Reverse Mortgage repaid? Repayment occurs when your home is no longer your primary residence or when the loan is refinanced.

What monies are owed the lender at the end of the Reverse Mortgage?   Monies that were used and any fees which accrued must be repaid to the lender. Principal, interest, mortgage insurance, and monthly services fees that have accrued over the life of your loan must be repaid.  If you opted for a line of credit, you only repay the portion of the line of credit which was accessed. You do not pay back what you did not use.

Different Types of Reverse Mortgages

Reverse Mortgage Safeguards

Links and Resources

Structuring Your Reverse Mortgage

What About My Heirs?

Steps to Getting Started

• For free information, call 1-888-290-5558

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