At first glance, reverse mortgages might seem a little confusing. The good news is they are not complicated once you know the basics and when you compare them side by side with a traditional mortgage. This FAQ Guide will help make things simple for you and answer all your questions.
A reverse mortgage is a loan that enables older homeowners, age 62 and older, to convert a portion of their home equity into tax-free cash in the form of loan proceeds* while continuing to hold title to your home and without being required to make monthly mortgage payments. You remain responsible to pay taxes, insurance, and any other obligations that might create a lien on the property, as well as to maintain the property. For the right person, at the right time, and for the right reason, a reverse mortgage can, in many cases, help homeowners to live more comfortably in retirement.
*Consult a financial advisor and appropriate government agencies for any effect a reverse mortgage may have on taxes or benefits. How you use the loan proceeds could impact your income taxes.
Since 1989, when reverse mortgages were launched as a program insured by the Federal Housing Administration of the United States Department of Housing and Urban Development, there have been over 1 million reverse mortgages originated in the USA.
The reason most people are attracted to a reverse mortgage is because it helps them with their number one retirement goal, which is to NOT outlive their money. It helps many homeowners to age in place – to stay in their home for the rest of their lives. Making monthly mortgage payments on a reverse mortgage is optional. With a reverse mortgage, many people feel a sense of comfort and confidence during their retirement years. Most folks are looking for a feeling of independence and financial freedom. They want to supplement their retirement income by controlling their budget to sustain a comfortable and safe retirement. It comes down to three words – Peace of Mind. Most homeowners feel a sense of peace and joy with a reverse mortgage so that they can live The GoodLife in Retirement.
The main thing to know about a reverse mortgage is that it’s just a loan. It’s almost the same as a traditional loan, but not quite. A reverse mortgage has an age minimum, a property type requirement, an equity eligibility test, and other nuances. It’s also very similar to a traditional home equity line of credit, but with some distinct differences that the helpful advisors at GoodLife can explain in detail.
It’s easy to see if you qualify for a reverse mortgage. All you have to do is call us to confirm that your age, your equity, and your property type entitle you to this program.
Or, Click here to Run the Numbers yourself, because our GoodLife Calculator allows you to see an estimate of the loan amount that might be available to you. You will be required to pay off any existing mortgages, pay loan fees and other 3rd party fees. In most cases, loan fees and costs are capped and may be financed as part of the reverse mortgage.
Your reverse mortgage proceeds are yours to use as you wish on expenses like health care, debt payments, home remodels, or your dream vacation around the globe. However, you may be required to set aside funds from your reverse mortgage proceeds in order to pay for repairs, property taxes and homeowner’s insurance.
You don’t have to make monthly payments on your reverse mortgage loan. Most people choose that route, but you are also allowed to voluntarily make payments – that’s up to you. Any existing mortgage must be paid off at closing, using the proceeds from your reverse mortgage. Depending upon the amount of equity you have in your home, a reverse mortgage can be set up as an equity line or a fixed rate loan and no monthly payments are required unless you decide to make a payment.
A reverse mortgage loan generally becomes due and payable when the last borrower (or eligible non-borrowing spouse) sells the home, no longer occupies the property as his/her primary residence, passes away, fails to maintain the property, or defaults on their taxes, insurance payments, or any other obligation that might create a lien on the property,. In the case of the last borrower’s passing, the borrower’s heirs are given six months to repay the loan or agree to the sale of the home.
No, your reverse mortgage lender will not own your home. It’s just a loan and a reverse mortgage lender is just a lender. The deed, the ownership, the vesting, the title to your home remains with you and you only. When the home is sold any equity remaining after the reverse mortgage has been paid belongs to the owners or their heirs.
Your Social Security benefits and Medicare typically won’t be affected by a reverse mortgage. However, in some cases, needs-tested programs, like Supplemental Security Income and Medicaid might be impacted. Under many federal and state government means-tested programs, loan advances retained by the borrower in a readily available form (such as your bank account) beyond the end of the month in which they are received could be viewed as a liquid resource and might reduce your benefits or potentially disqualify you from further benefits. Since there are variations in Medicaid programs in certain states, it is important to check the specific rules for your state. If you are currently receiving Medicaid or other means-tested benefits programs, you will likely want to preserve those benefits. You should therefore consider how you elect to receive your reverse mortgage proceeds and how you manage those proceeds as a key element in maintaining your benefit program eligibility. As an example, depending upon the Medicaid rules in your state, you might consider receiving your reverse mortgage loan proceeds through a line of credit rather than as a lump sum amount or by regularly scheduled payments and then managing each line of credit advance to ensure that you have spent each advance prior to the end of the month in which it was received. Please call us and we can give you the resources to make the right decision. Consult one of our reverse mortgage loan officers for details.
The IRS does not consider loan advances to be income for tax purposes (and the interest on a reverse mortgage is not deductible for tax purposes until it is actually paid). However, how you choose to use the proceeds of a reverse mortgage could impact your taxes. We recommend you consult your tax advisor to determine the impact of a reverse mortgage and how your planned use of loan proceeds would impact your tax liability.
There are many different ways you may choose to receive your reverse mortgage proceeds. Depending upon the amount of equity in your home and your financial circumstances, you can pick between a lump sum payment, fixed monthly payments, a line of credit, or some combination of these. Have it your way. Take your money, your equity, in any way you deem fit. You decide.
The amount of funds you are eligible to receive depends on a variety of factors, including your age, the appraised value of your home, the cost of the loan, , interest rates, and the overall program limits set by the Federal Housing Administration or loan investors. Typically, the older you are and the higher your home value, the more money you’ll qualify for. For a detailed estimate, check out our free online reverse mortgage calculator and run the numbers. Call us and we’ll confirm your estimate and maximize the amount of cash you might be able to access.
In order to qualify for a reverse mortgage, you must own and occupy your home, be at least 62-years-old, and have sufficient equity in your home. You also need the right type of property (see below) and must have acceptable credit and proof that your income and/or assets are sufficient to cover your property expenses, such as taxes and insurance.
Several property types are eligible for reverse mortgage loans, including single-family homes, 2 to 4-unit properties, townhouses, and FHA approved condominiums. The key is occupancy – to be eligible, you must live in the home (or one of the units). In addition, federal regulations and investor standards require that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made.
You may qualify even if you still owe money on an existing mortgage. Many people who acquire a reverse mortgage loan use it to pay off their existing mortgage in order to eliminate monthly mortgage payments and increase their monthly cash flow.
Every reverse mortgage lender sets its own rates, margins and fees, although fees may be capped for certain reverse mortgage programs. GoodLife offers competitive rates and fees to help you live comfortably in retirement. Certain lenders, including GoodLife, are also approved Ginnie Mae issuers which permits GoodLife to securitize reverse mortgages, typically providing a more efficient secondary market execution.
Educational counseling (by telephone or in person) is required for all reverse mortgages. Any questions or concerns you have concerning a reverse mortgage (or how you plan to use proceeds from a reverse mortgage loan) should be addressed during that session. The government and reverse mortgage industry are dedicated to ensuring you have all the information you need to make the right decision for your situation.
The main downside is that not everybody qualifies for a reverse mortgage. Reverse Mortgages are secure and are designed to provide ample consumer protections. Home safety, financial assessments, counseling sessions, and non-recourse terms help provide further safeguards throughout the process.
Reverse mortgages are designed specifically for seniors, and offer certain advantages that traditional HELOCs do not. Reverse Mortgage loans come with less restrictive requirements and unlike a HELOC, your Reverse Mortgage line of credit won’t ever be reduced or frozen as long as you continue to meet all the obligations of your loan.
Still have questions related to reverse mortgages? Our Comprehensive GoodLife Guide to Reverse Mortgages can provide you with more information to help you live The GoodLife in Retirement.DOWNLOAD NOW