Reverse Mortgage Frequently Asked Questions
What is a Reverse Mortgage?
A reverse mortgage is a loan against your primary residence that you Do Not have to repay for as long as you live in your home. Through a reverse mortgage you turn the equity in your home into cash without having to sell your home or repay the loan. The funds that you receive can be done in one of several ways or possibly a combination of several of the ways:
• A lump sum distribution at closing
• A monthly cash advance
• A credit line for you to draw from as you need the funds
What are the Requirements to Qualify for a Reverse Mortgage?
Qualification for a reverse mortgage is totally different from what we are all used to in qualifying for any type of loan. First of you do not have to have an income. Remember you do not make a monthly payment so you do not have to have an income. What about a credit score? It doesn’t matter. Your credit report will be accessed but only to verify that you do not have any federal tax liens against you. If you do have federal tax liens they must be cleared in order for the reverse mortgage to go into effect. They can possibly be cleared with funds at closing from the proceeds of your equity. What you do have to have is age. The minimum age requirement is 62.
Can I Purchase a Home Using a Reverse Mortgage?
Yes you can! One way would be to utilize the funds form your Reverse Mortgage and pay cash for a vacation or second home that is not your primary residence. After January 1, 2009 you will be able to use a Reverse Mortgage for the purchase of your primary residence.
Who has Title to My Home If I Have a Reverse Mortgage?
You Do, just the same as if you have a Forward Mortgage on your home.
What If My Credit is Not That Good?
It doesn’t matter. There is no credit, income or medical requirements needed in order for you to obtain a Reverse Mortgage, just equity in your home.
What are My Options for Receiving Funds?
You can receive your funds in several different ways or in a combination of them.
• A lump Sum Distribution
• As fixed monthly payments for a set period of time or for as long as you live in the home
• As a line of credit that allows you to draw on the funds at any time
How much Will I Get?
The proceeds from your Reverse Mortgage are based on several factors such as your age, the appraised value of your home and current interest rates.
Am I Limited on How I can Use the Funds from a Reverse Mortgage?
The simple answer is NO. You can use the proceeds from a Reverse Mortgage for whatever you elect to use them for.
What If I Have an Existing Mortgage?
The Reverse Mortgage must be in the first position. What this means is that your existing mortgage would be paid off as part of the transaction.
What Am I Required To Pay With A Reverse Mortgage?
The nice thing about a Reverse Mortgage is that you do not have a monthly mortgage payment. You are however required to maintain the real estate tax and homeowners insurance on the property.
When Is The Loan Repaid?
A reverse Mortgage is repaid when you permanently move from the home, sell the home or fail to occupy the home as your principal residence.
How Much Will I Owe When My Reverse Mortgage Comes Due?
The amount owed will be determined by how much you have borrowed to date, accrued interest and mortgage insurance, along with any servicing fees due. In no circumstance will your Reverse Mortgage Payoff exceed the value of the home when the payoff becomes due.
What about My Heirs and Their Inheritance?
When the residence is sold and the Reverse Mortgage payoff is satisfied, any proceeds from the sale over the payoff amount go to your estate.
I realize that these may not be all the questions regarding Reverse Mortgages. If you have a question about a Reverse Mortgage in Greater Atlanta contact me. Together we will find the answer to your questions.
For additional information on Reverse Mortgages in Atlanta please visit these previous articles in this series:
• Part One - The Basics
• Part Two – How to Use A Reverse Mortgage
• Part Three – Examples
• Part Four – Downsides and Pitfalls of Reverse Mortgages
{ 3 comments… read them below or add one }
Five Star Reverse Mortgage specializes in reverse mortgages for homeowners and homebuyers ages 62 and up. This is a great way to utilize the equity in your home.
Read more about it at http://www.atlantarealestateforum.com/sharon-dover-opens-five-star-reverse-mortgage-4963/
Reverse Mortgages work well for some older home homeowners, but be carefull. Know what you’re signing up for before you sign on the dotted lines. Great series Mack. I like how you split it up into 5 parts.
Thanks for stopping by Dylan. I agree that prior to entering into Reverse Mortgage or any other mortgage, the consumer should know what they are signing up for. That was the primary reason that I wrote this series.