REVERSE MORTGAGE

REVERSE MORTGAGE LOANS

What is a Reverse Mortgage Loan?

A reverse mortgage loan is a loan designed to allow seniors to draw upon the equity in their homes. Seniors can select to receive the loan proceeds either by a lump sum payment, by monthly installments, as a line of credit or as a combination of a line of credit and monthly installments thus providing cash flow even after retirement. The reason this type of loan is called a “reverse mortgage loan” is because the loan proceeds are paid to the home owner.

Eventually the money paid to the homeowner is repaid with interest, however the loan generally does not become due until the borrower passes away, sells the home, no longer maintains the home as the primary residence or fails to pay property taxes, fails to pay homeowners insurance or otherwise fails to comply with the loan terms.

Why should I get a Reverse Mortgage Loan?

Getting a reverse mortgage loan is a big step and needs to be carefully evaluated. Many people have found that by taking a reverse mortgage loan they avail themselves of the equity they have built in their home.

Typically those who benefit most from a reverse mortgage loan are those who plan to stay in their homes over an extended period and have built a decent amount of equity in their homes. 

Contact one of our professionals today to find out if you have enough home equity to make a reverse mortgage loan a good decision for you. If you have a good amount of equity in your home and you plan on staying there for an extended period of time then a reverse mortgage loan might be right for you.

How do I qualify for a Reverse Mortgage Loan?

If you own your home and are 62 years of age or older you might be eligible to apply for a reverse mortgage loan. The home you are thinking of taking the reverse mortgage loan out on must be your primary residence. There are some conditions to what type of home may qualify.

• Typically single-family units are accepted
• HUD-Approved Condominiums
• Most mobile homes and co-ops are generally not eligible

We can help you figure out if you’re eligible for a reverse mortgage loan. Call us today! If you’re ready to get started on a reverse mortgage loan apply now!

The Process

Below is the most common process for getting a reverse mortgage loan. Our professionals are eager to help you understand the reverse mortgage loan process. Please contact us with any questions.

Step 1 – Research Reverse Mortgage Loans
Speak with a mortgage professional about reverse mortgage loan options. Familiarize yourself with the various types of reverse mortgage loans and pick the one that is right for you.

Step 2 – Meet with a HUD approved counselor
In order to receive a reverse mortgage loan you must meet with an HUD approved councilor who will help you understand what it means to have a reverse mortgage loan. Independent HUD counseling typically costs $125 an we would be happy to provide you with a list of HUD approved counselors in your area.

Step 3 – Fill out our Reverse Mortgage Loan application
After you’ve determined which reverse mortgage loan option best suits you fill out our reverse mortgage loan application by clicking here. Your information is securely stored and transmitted.

Step 4 – Your application is processed and your home is appraised
While your application is being processed a licensed appraiser will determine if your house needs any kind of repair. Any problems must be fixed before you can be approved.

Step 5 – Your loan reaches underwriting
All details are worked out and your loan is underwritten. Additionally it will be determined whether you’ve been approved or not.

Step 6 – Your loan reaches closing
Once you are approved your loan will enter closing where you’ll get the chance to review the terms and sign the paperwork.

Step 7 – Receive your payments
After closing you’ll have three business days in which to cancel the loan. Once that grace period is up, you’ll start to receive the reverse mortgage loan proceeds according to the manner that you have elected: one-time lump sum payment, monthly installments, as a line of credit or as a combination of a line of credit and monthly installments.

Step 8 – Repaying your Reverse Mortgage Loan
Your reverse mortgage loan becomes due under the following circumstances.

• Homeowner death (unless the home continues to be the primary residence for a non-borrowing spouse)
• Sale of home
• The home is no longer the borrower or non-borrowing spouse’s primary residence.
• Failure to maintain insurance, property taxes or otherwise comply with loan terms.
• Any other event of default. (Failure to pay property taxes, Failure to keep the home in good repair, Failure to insure the home, Taking of new debt on the home, Bankruptcy, Abandonment or donation of the home, Eminent domain)

What About Repaying a Reverse Mortgage Loan?

The very nature of a reverse mortgage loan can be confusing. With a reverse mortgage loan, lenders pay you either in monthly installments, with one lump sum, a line of credit or as a combination of a line of credit and monthly installments. The following lists provide information regarding repayment of a reverse mortgage loan.

A reverse mortgage loan comes due when under the following conditions:

• Death of the homeowner or last surviving eligible non-borrowing spouse
• Upon sale of the home by the homeowner
• If the homeowner lives elsewhere for 12 consecutive months (i.e. assisted living home)
• Upon an instance of default.

When the reverse mortgage loan becomes due there are two options for paying it off.

1. Proceeds from the sale of the home
2. The homeowner or heirs of the homeowner can refinance the loan

Like all loans a reverse mortgage loan does carry conditions in order to remain valid. Reasons a borrower may find themselves in default include:

• Failure to pay property taxes
• Failure to keep the home in good repair
• Failure to insure the home
• Taking of new debt on the home
• Bankruptcy
• Abandonment or donation of the home
• Eminent domain

What Are the Costs of Getting a Reverse Mortgage Loan?

Much like a traditional mortgage, a reverse mortgage loan does have fees associated with securing it. The following is a list explaining common fees you may have to pay when getting your reverse mortgage loan.

Origination Fee – The origination fee covers the lenders operating expenses associated with making the reverse mortgage loan. This can include things like overhead, marketing and title searches.

A lender can charge a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders can charge 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000 up to a cap of $6,000.

Appraisal Fees – Before a reverse mortgage loan can be approved an appraiser will come to your home and inspect it. The appraiser will be looking to determine the worth of your home based mostly on condition, location and the current market situation.

If the appraiser uncovers a significant problem you will be required to hire a contractor to fix the problem before obtaining your reverse mortgage loan. That same appraiser will come out again and re-inspect the property.

Mortgage Insurance Premium – The mortgage insurance premium is a fee associated with the HECM reverse mortgage loan. The initial MIP will be .5 percent or 2.5 percent, depending on the amount you request to be disbursed. Additionally, you will be charged an annual MIP that equals 1.25% of the loan balance.

The mortgage insurance premium guarantees that you will continue to receive your monthly payments and that you will never owe more that what your home is worth once the loan reaches maturity unless you choose to payoff the loan while you or a non-borrowing spouse are still living in the home.

Closing Costs – Closing costs that are generally included in a reverse mortgage loan are:

• Credit Report
• Document Preparation
• Flood zone certification
• Termite inspection
• Attorney’s fee and title examination
• Recording fees
• Escrow/Settlement fee
• Other fees