Reverse Mortgage

Reverse Mortgage questions and answers

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Q: Reverse mortgage?
I have found there is a TON of misunderstanding around reverse mortgages. 1. What do you think a reverse mortgage is? 2. How do you think it works? 3. Why do you think it is good/bad? You must answer all three to be considered for best answer.

A: Reverse mortgage is a funding option that gives senior citizens a payout now without a mortgage payment Reverse cashes out home value now; leaves repayment to estate, or by sale of home after death of lender Good; instant cash with no repayment worry Bad; estate loses house as an asset or has to repay mortgage.

Q: How does a reverse mortgage affect medicaid qualification?
My 66 year old mother is considering a reverse mortgage, but even with that supplemental income potential, she will still need to apply for Medicaid to cover prescription expenses. Will a reverse mortgage affect her qualification for Medicaid?

A: Factoid: Most people move out of their home at age 82 with a reverse mortgage. If she is typical she will have nothing to her name when she sells the home. To me - reverse mortgages are a scam that needs regulation by the federal goverment. Reverse mortgages are robbing the trusting and elderly. Just like ARM loans did. Sell the house - get the cash out - buy a small condo or rent. /

Q: Reverse mortgage, what are the payback options and how is the money accessed and distributed?
The reverse mortgage will be for my mother who is unable to manager her funds. How can I protect her funds and administer her monies safely? Is it possible to put restrictions on where and how much money is used?

A: Payback option - pay it off at death or permanent move. If you can pay it back earlier, you don't need a reverse mortgage. You need to form a trust with the proceeds of the reverse mortgage. The trust can say virtually anything your mother wants to say about how to administer and what restrictions. A trust attorney can do this relatively easily.

Q: What happens to a reverse mortgage after the person have to go to nursing home. How does that work?
What happens to a reverse mortgage after the person have to go to nursing home. How does that work?

A: Generally, the loan ends when the homeowner dies, sells the house, or, depending on the loan conditions, moves out of the house for 12 consecutive months (for example, to go into an assisted living home or due to physical or mental illness the borrower is not able to live in the property on which the loan has been taken. At that point, the reverse mortgage can be paid off with the proceeds of the sale of the house, or if the borrower has died, the property can be refinanced by the heirs of the homeowner's estate with a regular mortgage. If the proceeds exceed the loan amount including compounded interest and fees, the owner of the house receives the difference. If the owner has died, the heirs receive the difference. For cases where the proceeds are not sufficient to pay off the loan, then the bank (or insurance which the bank has on the loan) absorbs the difference. So, in your scenario, it would depend on the loan conditions.

Q: what is a reverse mortgage and how do people benefit from them?
What exactly is a reverse mortgage? Why don't people have to pay it back?

A: A reverse mortgage is a loan that allows people ages 62 and up to get the money they need for any expenses they may have. Unlike traditional mortgages, there are no monthly payments on a reverse mortgage. The reverse mortgage isn’t paid until the person who took out the mortgage moves, sells the home or passes away. At that time, the reverse mortgage is paid out of the proceeds of the home sale.

Q: Where can I find a Reverse Mortgage lender in Texas?
I have a home in San Antonio, TX on which I have quiet a bit of equity. I would like to get a HECM Reverse Mortgage and need a lender that specializes in Reverse Mortgages in Texas.

A: Hi, you can go to www.texasreverse.net and visit that website to find a Reverse Mortgage lender in San Antonio or Texas.

Q: Is there a reverse mortgage available for people less than 62 years old?
I am a US homeowner. Instead of refinancing, I wanted to explore the possibility of a reverse mortgage.All I have seen so far is that this is only good for homeowners aged 62 or more. Is there a company that provides reverse mortgages for those younger than 62?

A: YES A reverse mortgage is a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years. Many of the same costs that someone pays to obtain a home purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too. You can expect to be charged an origination fee, up-front mortgage insurance premium (for the FHA Home Equity Conversion Mortgage or HECM), an appraisal fee, and certain other standard closing costs. In most cases, these fees and costs are capped and may be financed as part of the reverse mortgage. Below is a more in-depth explanation of each type of fee. Origination Fee The origination fee covers a lender's operating expenses—including office overhead, marketing costs, etc.—for making the reverse mortgage. Under the HECM program, which accounts for 90 percent of all reverse mortgages made in the U.S., the origination fee is equal to the greater of $2,000 or 2 percent of the maximum claim amount (i.e., county FHA loan limit). Currently, the FHA loan limit varies from a low of $200,160 (for rural areas) to a high of $362,790 (for high-cost metropolitan areas). Therefore, the 2 percent origination fee generally ranges between $4,003 (2 percent of $200,160) and $7,256 (2 percent of $362,790). Home Keeper borrowers are charged an origination fee that may not exceed 2 percent of the value of the home. With either product, the entire amount of the origination fee may be financed as part of the mortgage. Mortgage Insurance Premium Under the HECM program, borrowers are charged a mortgage insurance premium (MIP), equal to 2 percent of the maximum claim amount, or home value, whichever is less, plus an annual premium thereafter equal to 0.5 percent of the loan balance. The MIP guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds. Furthermore, the MIP guarantees that you will never owe more than the value of your home when the HECM must be repaid. Appraisal Fee An appraiser is responsible for assigning a current market value to your home. Appraisal fees generally range between $300-$400. In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made. If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. The cost of the repairs may be financed in the loan and completed after the reverse mortgage is made. Appraisers generally charge $50-$75 dollars for the follow-up examination. Closing Costs Other closing costs that are commonly charged to a reverse mortgage borrower, include: Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Cost: Generally under $20 Flood certification fee. Determines whether the property is located on a federally designated flood plane. Cost: Generally under $20 Escrow, Settlement or Closing fee. Generally includes a title search and various other required closing services. Cost: $150-$450 Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost: $75-$150 Recording fee. Fee charged to record the mortgage lien with the County Recorder's Office. Cost: $50-$100 Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor. Cost: Generally under $50 Title insurance. Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against any loss arising from disputes over ownership of a property. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance. Pest Inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites. Cost: Generally under $100 Survey. Determines the official boundaries of the property. It's typically ordered to make sure that any adjoining property has not inadvertently encroached on the reverse mortgage borrower's property. Cost: Generally under $250 Service Fee Set-Aside The service fee set-aside is an amount of money deducted from the available loan proceeds at closing to cover the projected costs of servicing your account. Federal regulations allow the loan servicer (which may or may not be the same company as the originating lender) to charge a monthly fee that ranges between $30-$35. The amount of money set-aside is largely determined by the borrower's age and life expectancy. Generally, the set-aside can amount to several thousand dollars. (Note: The servicing set aside is just a calculation and not a charge. The only amount added to your loan balance is the monthly servicing fee, which ranges from $30-$35.) If you are looking for a Lender for reverse mortgage you can click on the link below http://www.reversemortgage.org/Default.aspx?tabid=255

Q: do you have income with a reverse mortgage loan?
I'm having trouble finding the law that states the answers for these. I'm only looking for the law that will answer my questions. When I take my monthly draw from the bank from my reverse mortgage loan is that considered income? Also can I deduct the interest when it is added to the outstanding loan balance each month.

A: I really dont know, but it sounds to me like it shouldnt if you lived in the house for 2 of the last 5 years on like the first $500,000 of profit. and if it is taxable, im sure only a fraction would be taxed from each months draw. the portion that is considered profit would be taxed, not your basis. this is what sound the most reasonable to me call the irs.gov people

Q: When someone with a reverse mortgage passes away, and they have not yet received the full value, what happens?
If someone who has a reverse mortgage, and has been receiving payments for a few years, passes away before they are able to receive the full value for their home, what happens next? I think that what happens is the property is sold by the estate and the balance owed on the mortgage is paid from the proceeds of sale, but I need to find out where this is in writing. Is there a statute or code somewhere regarding reverse mortgages? Thanks!

A: If it's an FHA reverse mortgage, then what you say is correct. The property will be sold and the estate will receive the balance minus the debt and the interest accrued.

Q: Who is a good lender to use for a reverse mortgage loan for my dad?
My 83 year old father needs repairs on his home which is paid for. He is on a fixed income and is considering a reverse mortgage. There is no one else living with him and he doesn't plan to move.

A: Check out Loan-Com.info and do a search for reverse mortgage loans. They have dozens of loan programs available at reasonable rates and affordable terms.

Q: How much equity is needed for a reverse mortgage?
I am looking into getting a reverse mortgage for my father. He lives in the Miami, Florida area. About a 2 years ago he refied and I want to know whether or not he will be qualified because of the last of equity.

A: It is usually about 50%, but they also hold his others debts against him, which could lower his actually equity amount.

Q: CAn someone explain a reverse mortgage purchase when buying a home?
Man, 69yrs old getting divorced, need to use a reverse mortgage to purchase, i need it explained to me, how it works.

A: A reverse mortgage is not a purchase at all it is a refinance of his current home. There MuST be a lot of equity in the home in order to make this one work. It is an FHA product for the elderly that allows them to take cash out of their home and never pay on the money. It just sits there and collects interest and at the time of their death the property must be refinanced by the estate or sold to satisfy the loan. If there is no equity in the home FHA takes the home and sell it on their own and takes the loss with the mortgage insurance making up the rest. Hope this answers your question I am a mortgage banker in TN & KY

Q: What are the pros and cons of an elderly couple doing a reverse mortgage?
We are in our mid sixties. Would it be advantageous to do a reverse mortgage?

A: Mid-sixties is a little on the young side. The optimal age for a reverse mortgage is 74-76. The key is to remain in your home as long as possible to amortize the high upfront costs. If the loan terminates (due to death, moveout, etc) within 5-7 years, you'll have paid a very high price. This is the biggest disadvantage. A recent HUD study shows that most HECM (home equity conversion mortgages) reverse mortgages are terminated within seven years. The big advantage of reverse mortgages is that in the right circumstances you can access home equity for the rest of your life to help with retirement costs and not have to worry about making monthly loan repayments. Here's a summary of what several well-known personal finance experts think about reverse mortgages which may be useful to you: http://www.reverse-mortgage-information.org/what-experts-are-saying-about-reverse-mortgages/ Cheers

Q: How much equity does someone have to have in their home in order to qualify for a reverse mortgage?
My elderly family member owns a home (paid it off years ago) but now has a line of credit against the house for 100K. I am concerned that this member of my family is running out of money and will need a reverse mortgage in the next year or two as they will require an in home health care worker. I would guesstimate the value of the home to be 275K to 300K right now. Does anyone know if a reverse mortgage would be possible for her?

A: Hello - Please go to this website: http://www.hud.gov/offices/hsg/sfh/hecm/hecmhome.cfm This is the official site by the US Department of Housing and Urban Development. Better known as HUD. There is also information by state. There is another web link from the site and it is: http://www.reverse.org/ Good luck to you and for caring about your loved ones.

Q: If a family has a reverse mortgage, can they get out of that, and refinance to get money out of their equity?
Im trying to help my friends family out, and they have had a reverse mortgage for 4 yrs, and need money to pay off bills. Can they get out of a reverse morgage and refinance to get money out of their equity?

A: They may be able to refinance the reverse mortgage and get a lump sum and continue getting the monthly payments from the reverse mortgage. They can talk with a reverse mortgage specialist about this.