How Can a Reverse Mortgage Help You?
Call us to speak with a Reverse Mortgage Specialist
About Reverse Mortgages
- You must be 62 years of age or older to particpate
- Own the property outright or have paid-down a sizeable amount
- Occupy the property as your principal residence
- Not be delinquent on any federal debt
- Have the financial resources required to make timely payment of ongoing property charges such as property taxes, insurance and HOA fees, etc.
- Participate in a consumer information session given by a HUD- approved HECM counselor
- Single family home or 2-4 unit home with one unit occupied by the borrower
- HUD-approved condominium project
- Manufactured home that meets FHA requirements
All properties must meet FHA property standards and flood requirements.
In order to ensure borrowers will have financial resources to continue to make timely payment of property taxes, insurance and Homeowner Association fees, etc. a portion of the qualifications are based on:
- The borrower(s) income, assets, monthly living expenses, and credit history are required to be verified
- Verification of timely payments of real estate taxes, hazard and flood insurance premiums
Pay Out Plans - How you get paid
For adjustable interest rate mortgages, you can select one of the following payment plans:
- Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term – equal monthly payments for a fixed period of months selected.
- Line of Credit – unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
- Modified Tenure – combination of line of credit and scheduled monthly payments for as long as you remain in the home.
- Modified Term – combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
The loan must be repaid if any of the following obligations of the loan are not met.
- The borrower(s) must continue to stay current on their property taxes and homeowner’s insurance while maintaining the condition of the property to meet the FHA loan guidelines.
- At least one borrower must continue to live in the home as their primary residence. For any reason a borrower on the loan no longer occupies the property the loan will be due.
- The home must continue to be owned by the borrower(s). If the property is sold the loan must be repaid.
Factors That Effect How Much You Can Get
- Age of the youngest borrower or eligible non-borrowing spouse
- Current interest rate;
- and Lesser of: appraised value; the HECM FHA mortgage limit of $679,650; or the sales price (only applicable to HECM for Purchase)
If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
What Are The Costs
You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.
The HECM loan includes several fees and charges, which includes:
- mortgage insurance premiums (initial and annual)
- third party charges
- origination fee
- interest and
- servicing fees.
The lender will discuss which fees and charges are mandatory.
You will be charged an initial mortgage insurance premium (MIP) at closing. The initial MIP will be 2%. Over the life of the loan, and an annual MIP that equals 0.5% of the outstanding mortgage balance.
Mortgage Insurance Premium
You will incur a cost for FHA mortgage insurance. The mortgage insurance guarantees that you will receive expected loan advances. You can finance the mortgage insurance premium (MIP) as part of your loan.
Third Party Charges
Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.
Origination fees are paid to compensate the lender for processing your HECM loan. Lender can charge the greater of $2,500 or 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.
Lenders or their agents provide servicing throughout the life of the HECM loan. This includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying real estate taxes and hazard insurance premium. Lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate or has a fixed interest rate. The lender may charge a monthly servicing fee of no more than $35 if the interest rate adjusts monthly.
(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds;
(2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees;
(3) the loan balance grows over time and interest is charged on the outstanding balance;
(4) the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and
(5) interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment.