Reverse mortgages give homeowners, 62 or older, a way to borrower money against the equity in their home with no mortgage payment as long as they live in the house. The interest, ongoing Mortgage Insurance Premium and Servicing fee (if there is one) are added to the balance each month and get repaid wherever the homeowner sells the house, moves out permanently or passes away. In the meantime, there is no mortgage payment!
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My clients have a variety of needs that they use the reverse mortgage for. One of the main ones is to improve monthly cashflow by eliminating their conventional mortgage payment. Some want to use the monthly income to be able to pay for in-home healthcare, so that they can stay in their homes as long as possible. And others just want access to the equity so that they can fulfill their dreams, like traveling to Bali every Spring.
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Many people have opinions based on mis-information about reverse mortgages. There were some features in early reverse mortgages that are no longer allowed, such as "equity share". The programs are much more consumer friendly and as a government insured program, much safer. One of the biggest misconceptions is that the bank owns the house. This simply isn't true. You continue to own your home and you are responsible for keeping the property taxes and homeowners insurance current, and for keeping the house in good repair.
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Competition from lenders around the fixed rate reverse mortgage has driven costs down. There is no origination fee, no servicing fee or servicing fee set-aside, and depending on the rate, lenders will cover the 2% upfront premium to FHA (2% of the max claim amount, which is the appraisal value or lending limit, whichever is lower). Please allow me to give you a new quote so show you how low the closing costs are right now.
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Why get a Reverse Mortgage?
1. No repayment for as long as you occupy your home
2. No taxes are paid on the cash from Reverse Mortgages
3. No pre-payment penalty on HECM
4. You retain title to the home
5. You may sell your home at any time
Common Misconceptions
"The lender could take my house." The homeowner retains full ownership. The Reverse Mortgage is just like any other mortgage; you own the title and the bank holds a lien. You can pay it off anytime you like.
"I can be thrown out of my own home." Homeowners can stay in the home as long as they live, with no payment requirement.
"I could end up owing more than my house is worth." The homeowner will never have to repay more than the value of the home at the time the loan is due.
"My heirs will be against it." Experience demonstrates heirs are in favor of Reverse Mortgages.
You can choose 3 options to receive the money from a reverse mortgage:
1) all at once (lump sum): this is required for the fixed rate program;
2) fixed monthly payments (for up to life);
3) a line of credit; or a combination of a line of credit and monthly payments. The most popular option, chosen by more than 60 percent of borrowers, is the line of credit, which allows you to draw on the loan proceeds at any time.
Keeping money in a reverse mortgage line of credit in most states will not count as an asset for Medicaid eligibility as this would be considered a loan and not a resource for Medicaid spend down. However transferring the money to an investment or to a bank account would represent an asset and would trigger a spend down requirement. Please note however that distinguishing between what portion of reverse mortgage proceeds might be counted as a loan and what portion as an asset is not a simple black and white decision. It is best to get an opinion from an elder-law attorney.
Some basic information about reverse mortgages is available under the "Learn More" button on the upper left.
For more information call John Ruybalid at (505)690-1029
Click Here To Use A Reverse Mortgage Calculator
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