Frequently Asked Questions
About Reverse Mortgages
Find answers and learn more about GoodLife reverse mortgages.
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Reverse Mortgage FAQs
Reverse mortgages can feel challenging to navigate alone, but we’re here to help. We’ve gathered answers to commonly asked questions about reverse mortgages so you can better understand the basics. Simply click on a topic below to learn more. If you can’t find the information you’re looking for in our FAQs, contact a GoodLife Reverse Mortgage Expert who will happily provide you with all the details you need to make a confidently informed decision.
What is a reverse mortgage?
A reverse mortgage is a loan that enables homeowners age 62 and older to convert a portion of their home equity into tax-free cash in the form of loan proceeds. Borrowers continue to hold the title to the home and are not required to make monthly mortgage payments. They must continue to pay taxes, mortgage insurance, and any other financial obligation that could result in a lien on the property, as well as maintain the property’s safe, working condition.
*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.
Why do people get a reverse mortgage?
Reverse mortgages can help prevent a borrower from outliving their money in retirement, and this financial security lends valuable peace of mind. Retirees shouldn’t have to worry about housing, health care, or where they’ll get their next meal once they stop working. A reverse mortgage can be used to supplement a limited fixed income. The resulting increase in cash flow can make it easier to afford the cost of living with less financial stress.
Although the main goal is financial freedom, borrowers can use the loan proceeds however they like—whether that may be to renovate their home, finance a large purchase, pay off existing debt or cover unexpected medical bills. A reverse mortgage also enables borrowers to age in place, so they can live out their retirement years in the comfort of their own home. They allow you to access the wealth you’ve accumulated in home equity, without having to sell or vacate the property.
Reverse mortgages can help people live better in retirement in many different ways. Since 1989, when reverse mortgages were launched as the home equity conversion mortgage (HECM)—a program insured by the Federal Housing Administration (FHA) of the United States Department of Housing and Urban Development (HUD)—there have been over one million reverse mortgages originated in the USA.
What are the qualifications for a reverse mortgage loan?
In order to qualify for a reverse mortgage, you must be at least 62 years old, own a considerable amount of home equity (typically, at least 50%), and occupy the property as your primary residence. The property must be eligible for financing through the FHA, and you must have acceptable credit with proof that your income and/or assets are sufficient to cover expenses such as property taxes and mortgage insurance.
What kind of properties are eligible for a reverse mortgage loan?
Several types of properties are eligible for reverse mortgage loans, including single-family homes, two- to four-unit properties, townhouses, and FHA-approved condominiums. Properties with five units or more are considered commercial and do not qualify.
To be eligible, you must live in the home (or one of the units) for over half of the calendar year. In addition, federal regulations and industry standards require your home to be structurally sound and in compliance with all home safety codes.
How do I know if I qualify for a reverse mortgage?
It’s easy. Simply give us a call to confirm that your age, equity, and property type entitle you to this program. You can also click on the button below to see if you qualify for a reverse mortgage online.
Can I still qualify for a reverse mortgage if I have an existing mortgage?
Yes, you may be eligible for a reverse mortgage 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 cash flow.
How is a reverse mortgage different from a traditional mortgage loan?
A reverse mortgage is a loan that’s similar to a traditional loan, but with a few key differences. In a traditional mortgage, borrowers make monthly payments that decrease their loan balance and increase their home equity. Alternatively, with a reverse mortgage, borrowers are not required to make monthly payments, so the loan balance increases and home equity decreases over time.
Borrowers must meet the minimum age requirement (62) and pass the equity eligibility test—but the size of the loan is not based on income nor credit-worthiness, as a traditional mortgage would be. Only certain types of properties are eligible for a reverse mortgage, and the owner must occupy the home as their primary residence.
How is a reverse mortgage line of credit different from a home equity line of credit (HELOC)?
Reverse mortgages are designed specifically for homeowners at least 62 years of age. They offer certain advantages that traditional HELOCs do not, such as less restrictive lending requirements. And, unlike a HELOC, the line of credit obtained through a home equity conversion mortgage (HECM) will never be reduced or frozen—so long as you continue to meet all your loan obligations—because they are insured through the FHA.
How much can I get from my reverse mortgage loan?
The amount of funds you are eligible to receive through reverse mortgage loan proceeds depends on a variety of factors including your age, the appraised value of your home, the cost of the loan, current interest rates, and lending limits set by the FHA.
Typically, the older your age and the higher your home value, the more money you’ll qualify to lend. For a detailed estimate, run the numbers using our free online reverse mortgage calculator. Call us to confirm your estimate and see how GoodLife can help you maximize the amount of cash you may be able to access.
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Why do reverse mortgage proceeds vary by lender?
Every reverse mortgage lender sets its own rates, margins, and fees, although fees may be capped for certain reverse mortgage programs. GoodLife offers lower rates and fees than most lenders in the industry, so you can keep more of your money in your pocket. By cutting out the middleman, we’re able to pass the savings directly on to you and distribute funds faster due to fewer third-party handoffs.
How do I receive the proceeds from my reverse mortgage loan?
There are several 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 a combination of these options.
This gives you the flexibility to access your money according to your needs. Whether you’d like the funds upfront to finance an expensive purchase, or in the form of monthly installments to supplement Social Security benefits, the choice is yours.
Whatever you decide, you can count on GoodLife to fund your reverse mortgage expediently and put money in your hands as quickly as possible, with much faster processing times than other lenders in the industry.
Are there restrictions on how I can use the money from a reverse mortgage?
Generally, no; reverse mortgage loan proceeds can be used as disposable cash to pay for any number of things, such as travel, leisure, home renovation, health care, outstanding loans, and more.
However, you may be required to set aside funds from your proceeds in order to cover required property repairs, taxes, and insurance. You will also be required to pay off any existing mortgages and loan fees at the time of close. In most cases, closing costs are capped and may be financed as part of the reverse mortgage.
Do I owe taxes on a reverse mortgage?
The IRS does not consider loan advances as income for tax purposes, and the interest on a reverse mortgage is not tax-deductible until it’s paid. However, the way you spend proceeds from a reverse mortgage may impact your taxes. We recommend you consult your tax advisor to determine the potential impact of a reverse mortgage and how your planned use of loan proceeds could impact your tax liability.
Do reverse mortgages affect Social Security or Medicare benefits?
Typically, Social Security and Medicare benefits are not affected by a reverse mortgage. However, in some cases, needs-based government programs such as Supplemental Security Income and Medicaid may be impacted. Under these federal and programs, loan advances that are retained by the borrower in a readily available form 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.
Therefore, you should consider how you elect to receive your reverse mortgage proceeds and how you manage those proceeds to maintain benefit eligibility. Since there are variations in Medicaid programs in certain states, it’s important to check the specific rules for your state. For example, depending on where you live, you might consider receiving loan proceeds through a line of credit rather than a lump sum or scheduled installment, then carefully managing each line of credit advance to protect your benefits.
GoodLife Reverse Mortgage Specialists will always take the time to listen to your unique circumstances to find the best possible solution for your specific needs. Give us a call to discuss your options.
If I use a reverse mortgage, does that mean the lender or bank owns my home?
No, your lender does not own your home. A reverse mortgage enables you to borrow money using your property as security for the loan; the deed, ownership, vesting, and title to your home remains with you until the loan reaches maturity, signaling its due and payable status.
When the loan becomes due and payable, borrowers (or their surviving heirs) have the option to repay the loan and retain homeownership, or sell the home to cover the balance. If the home is sold, any equity that remains after the reverse mortgage has been paid belongs to the owners or their heirs.
Are there monthly mortgage payments?
No, you don’t have to make monthly payments on your reverse mortgage loan but you are allowed to make voluntary payments.
When does a reverse mortgage have to be paid back?
A reverse mortgage loan generally becomes due and payable when an event triggers loan maturation, such as when the last borrower (or eligible non-borrowing spouse) sells the home, no longer occupies the property as his/her primary residence, or passes away. In the case of the last borrower’s passing, the surviving heirs are given six months to repay the loan or agree to the sale of the home.
It may also enter due and payable status if the borrower defaults on his or her taxes, insurance payments, or any other financial obligation that might create a lien on the property, as well as failing to maintain the property to FHA standards.
Why do I have to go through a counseling session?
In the interest of consumer safety and ensuring borrowers receive all the information they need to make a sound decision given their specific circumstances, the government requires all potential borrowers to attend a HUD-approved counseling session. A third-party counselor will provide an unbiased explanation of the HECM program, including the responsibilities you’ll be accountable for.
Are there any downsides or risks involved with a reverse mortgage?
Most loans, including reverse mortgages, involve a certain degree of risk. Reverse mortgages are federally insured, non-recourse loans, which affords borrowers important protections because proceeds are guaranteed as agreed upon—even if the lender was to go bankrupt—and the borrower will never owe more than the outstanding loan balance of 95% of the appraised property value, whichever is less. Home safety appraisals, financial assessments, and mandated counseling are also designed to provide additional safeguards.
However, any decision that can impact your financial future should be carefully considered, so it’s critical that you understand the terms of your loan before close and are fully aware of all that’s expected of you. At GoodLife, you can count on us to explain the fine print in great detail and discuss all applicable closing costs upfront to ensure you never feel caught off guard. We’ll patiently answer any questions you may have to make sure you feel safely informed every step of the way.
If you have additional questions about reverse mortgages, don’t hesitate to contact GoodLife for further assistance. We’re committed to helping others live better in retirement, and we’ll answer any questions you may have without pressure to commit.