Reverse Mortgage Frequently Asked Questions
Q: I was told I no longer own my home if I do a Reverse Mortgage. Is that true?
Not true. You own your home. However, you pledge the home as collateral.
Q: Am I required to make a payment on my Reverse Mortgage?
No, you are not required to make a payment. However, if you choose to make a payment, the lender will gladly accept it from you.
Q: What are my obligations with a Reverse Mortgage (HECM)?
You remain owner of the house. Therefore, you have all obligations of homeownership. You are responsible for the property taxes, insurances, and other fees that might apply. Also you must maintain the house. Once you don't live in the home anymore, the HECM becomes due.
Q: When does the Reverse Mortgage (HECM) become due and payable?
When you and your spouse no longer live in the property or if both of you have passed away, the HECM becomes due. In that case, you or your heirs have two options:
1. Pay off the HECM, including the accrued interest. You or your heirs retain ownership of the house. Lines of credit or tenure reserves that have not been drawn do not have to be paid off! 2. Give up ownership of the house and receive the difference between the net sale proceeds of the house and the loan balance, minus the cost for selling the house. Neither you nor your heir will be liable for any shortfall, in the event the net sales price is less than the balance of the loan.
Q: I hear the Reverse Mortgage loan referred to as HECM. What is HECM?
HECM is an acronym for Home Equity Conversion Mortgage. This is also known as Reverse Mortgage.
Q: What does Loan Maturity mean?
Loan Maturity means the end of the life of your loan. If there is a balance on your mortgage, it is due immediately.
Q: Will there be a balance on my Reverse Mortgage if I die or move out?
More than likely. We can help you determine this.
Q: How will my heirs pay the balance if it is due immediately?
Your heirs are allowed 12 months to arrange loan payoff with the lender. Please communicate with the lender your intentions.
Q: Can I refinance to a Reverse Mortgage and payoff my current loan?
Yes. Generally if you owe less than 40% of the value of your home this can be accomplished.
Q: Do I have to claim the money I take from the Reverse Mortgage as income on my tax return?
No. The money you take from the Reverse Mortgage is Tax FREE!
Q: Will the money I take from the Reverse Mortgage cause my Social Security income to be taxed?
No. It may allow you to defer your Social Security Benefits so you can claim more in your later years.
Q: When I die, can my kids live in the home and use the Reverse Mortgage?
No.
Q: Are my heirs required to sell the home when I die?
No. If they do not want the hassle of selling the home, they will communicate to the lender that they do not want the home. The lender then takes on the responsibility. It is called Deed in lieu.
Q: What is a Deed in Lieu?
It is a transaction where the homeowner voluntarily transfers title of the home to the lender in exchange for the release of any further mortgage obligation.
Q: If my heirs sell the home for $300,000 and the balance owed on the reverse mortgage is $200,000, who keeps the difference?
Your heirs.
Q: Can my heirs buy the house from the bank?
Yes. They can purchase the home from the bank at 95% of the current value.
Q: What if the balance of the Reverse Mortgage is more than what the home is worth?
The lender forgives or washes their hands on any amount over the appraised value.
Q: Can I put my home in a Trust?
Yes.
Q: Can I pull cash out of my home with a Reverse Mortgage?
Yes.
Q: How much cash can I get?
It depends. You will qualify for a certain loan amount based on the age of the youngest borrower. We then subtract any existing mortgage liens on your property from the amount you qualify for. The remaining balance is cash you can access.
Q: What is the maximum loan I can get?
Every clients maximum loan amount will be different. Please call us and we can help determine the amount.
Q: What if I have bad credit, do I still qualify?
Each borrowers credit situation is different. We do a credit check on every borrower that applies for a Reverse Mortgage. All credit is subject to an underwriting decision.
Q: Do I have to be a certain age to be eligible for a Reverse Mortgage?
Yes, in Utah the FHA insured loan programs minimum age is 62 years old. We have other loan options for those who are age 55 or older.
Q: I am 62, but my spouse is not. Are we still eligible for the Reverse Mortgage?
Yes. Your spouse would be considered a non-borrowing spouse. He/She would not be on title, but could still live in the home after you die.
Q: I was told I could use the Reverse Mortgage like a home equity line of credit?
There are two types of Reverse Mortgage loans. A Fixed Rate and a Line of Credit. So, yes
you can use it like a Home Equity Line of Credit if you choose that type of loan. 90% of
of our clients choose the Line of Credit Option.
Q: Is there a benefit to choosing the Line of Credit Option over the Fixed Option?
Yes. The line of credit amount grows annually based on the unused portion of funds, regardless of the equity position. This means, every year you could have more available money from the Reverse Mortgage.
Q: What does government-insured mean for me?
You are protected until you turn 150 years old! Your HECM will continue even if the balance of your loan exceeds the value of your home. The line of credit will still be available and you will continue receiving monthly disbursements you may have set up. The lender will never ask you for money to cover possible losses or reduce disbursements to you.