Do you offer Reverse Mortgages
If you are 62 years of age or over:
Your home can be a source of extra income. Talk to us today to learn all about reverse mortgages.
Your retirement years should be spent without financial worry. So if you're 62 or older, now may be the time to consider a reverse mortgage to unlock the wealth you've built up under your own roof. And you can do it while still living in your home and remaining the owner! My role is to ensure you understand how a reverse mortgage works, determine if it's right for you, help you through the loan process, and answer your questions.
The Four Nevers of Reverse Mortgage
How a reverse mortgage protects you
If you’re 62 or older, a reverse mortgage is a safe and secure way for you to use your home to get the cash you need.
Reverse mortgages are unique and often misunderstood, but as you learn about their advantages on the following screens, keep these “Four Nevers” of reverse mortgages in mind:
As long as you remain in your home, you will:
- Never have to make a monthly payment
- Never be forced to move
- Never owe more than the sale price of your home
- Never give up title and ownership of your home
That’s right – a reverse mortgage pays money to you, as though you had sold your house. You can receive monthly payments or a lump-sum payout based on the value of your house, but you’ll never owe more than your house is worth. Moreover, you’ll never have to move or even give up ownership. The house remains yours, just as is today.
Understanding The Basics
What makes it a "reverse" mortgage?
A reverse mortgage is a loan whose features make it essentially the reverse of a traditional "forward" mortgage:
· Instead of paying your lender, your lender pays you.
· Instead of reducing your debt as the loan term progresses, you increase it.
· Instead of turning your income into equity, you turn your equity into income.
That last feature - the ability to turn your equity into income - is what most distinguishes a reverse mortgage from other loans, and it's what makes it so valuable to many senior homeowners. Having spent years repaying the mortgage that allowed you to buy your home, you can now tap into that investment to help you achieve your goals later in life.
However you plan to use your equity - whether traveling, paying medical expenses, improving your home, or just adding a bit of cushion to your monthly budget - you'll have a golden opportunity to put your nest egg to good use.
What happens to my home?
Nothing. You remain the owner for as long as you live there, and you will never be forced to move. If you decide to sell or move from your home, the outstanding balance of your reverse mortgage will become due, just as it would with a traditional mortgage.
Unlike a traditional mortgage, however, your balance can never exceed the value of your home when you sell it. So no matter how much money you receive through your reverse mortgage, you will never owe more than your home is worth. Having that assurance is important. After all, you've put a lot of money into your home, and you should have control over how to take it out.
Who is eligible?
To be eligible for a reverse mortgage, all owners listed on the home's title must be at least 62 years of age and occupy the home as their principal residence for the majority of the year. The property must be a single-family or a two-to-four unit dwelling. Townhomes, detached homes, condominium units, planned unit developments (PUDs), and some manufactured homes are also eligible.
Speaking with an approved reverse mortgage counselor is another important eligibility requirement. The Department of Housing and Urban Development (HUD) supervises counseling agencies that can work with you in person or, more commonly, over the phone. We can provide you with a list of authorized counselors
How your Loan Works
Rising debt, falling equity
The monthly payments you made to pay off your original mortgage generally served a common purpose - to decrease your debt and increase your equity. The payments you receive with a reverse mortgage have exactly the opposite effect - they increase your debt and decrease your equity.
Why would I increase my debt?
Increasing your debt may not seem like a wise financial strategy at first-indeed, it isn't for everyone-but your reverse mortgage debt is different from most other kinds. Usually, taking out a loan means you must commit to repay it using money that you will earn in the future-in other words, using money that isn't guaranteed.
When you take out a reverse mortgage, on the other hand, the equity you already have in your home is used to pay off the loan. That's why a reverse mortgage is known as a non-recourse loan, which means that your home is the lender's only recourse to collect on the debt. None of your other assets are affected.
Only when you sell or move from your home, or when you pass away, does the debt become due. Generally, it's payable from the proceeds from the sale of your home.
If your home's value is less than the outstanding balance, you will not owe a single dollar of the difference. On the other hand, if you sell the home for more than the loan balance at that time, you or your heirs will keep the difference.
How Much Can I Borrow?
The maximum loan amount for a reverse mortgage is based primarily on three factors: the age of the youngest borrower, the value of the home, and the current interest rate. Our Reverse Mortgage Calculator can estimate the amount you could receive from a reverse mortgage.
Important Considerations
What you will pay
In addition to interest, a reverse mortgage typically involves four types of fees:
· An origination fee
· Third-party closing costs
· Mortgage insurance premiums
· A monthly servicing fee
You can generally finance these costs as part of your loan by having them deducted from the loan amount.
When you apply for a reverse mortgage, I'll calculate the loan's Total Annual Loan Cost (TALC). It expresses all of the loan's various costs as an annual percentage and is similar to the Annual Percentage Rate (APR) calculated for standard forward mortgages.
Choosing Your Payment Plan
Depending on the specific reverse program you choose, you can select one of four options for receiving your reverse mortgage funds:
- Term: Provides fixed cash advances for a predetermined time period.
- Tenure: Provides fixed cash advances for as long as you occupy the property as your primary residence.
- Line of Credit: Establishes a credit line that you can draw upon as you wish.
- Combination: Allows you to combine any of the other three payment options in a way that fits your needs.
Choosing Your Interest Rate Adjustment
All reverse mortgages carry adjustable interest rates, but with some programs you can choose a rate that adjusts annually or monthly.
Monthly rate adjustments usually have lifetime caps, which limit the number of points they can increase. On the other hand, they offer a lower maximum loan amount.
Fixed rate programs offer a larger maximum loan amount, but they usually require a borrower to take all available loan funds out in cash when the loan is approved.
If you choose to receive your reverse funds as monthly cash advances, note that these rate adjustments will not change the amount you receive each month. They only affect the amount of interest that is charged on the total loan balance.
