Reverse Mortgage Frequently Asked Questions

Reverse mortgages involve a lot of detail. Too much detail for a simple flyer. But we’re good with details, and we’ve collected the questions most frequently asked about reverse mortgages here for you.

1. How do I qualify for a reverse mortgage?

To become eligible for a reverse mortgage you must be at least 62 years old and own your home. You must also have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence.

2. How much money can I get?

The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens and current interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.

3. How do I receive my money?

There are several options to choose from. You can take the money in a lump sum, set up a line of credit, monthly payment or a combination of the three.

4. What costs are associated with a
reverse mortgage?

The costs of a “forward” loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, and a Mortgage Insurance Premium (MIP) is paid to HUD on the Home Equity Conversion
Mortgage (HECM). There is also an appraisal fee, a flood certification fee, a document preparation fee, title and settlement fees and other standard closing costs associated with a reverse mortgage.

5. Do I get taxed on the money I receive from my reverse mortgage?

The equity in your home is considered your money and not additional income; therefore all the funds from a reverse mortgage are tax-free.

6. Is it required that I receive counseling before getting a reverse mortgage?

Yes, counseling is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.

7. Do I have to pay any fees to the reverse mortgage lender during the course of my loan?

A reverse mortgage was created so borrowers don’t have to pay fees during the course of the loan. However, there is a monthly servicing fee, which is deducted from the account for every month during the life of the loan.

8. Am I responsible for paying my homeowners insurance and property taxes?

Yes, both must be kept current at all times. If you choose, and if loan proceeds are available, the lender can impound your taxes and insurance and pay them for you when they become due.

9. Does my house have to be in prime condition in order for me to receive a reverse mortgage?

An appraiser will appraise the house following FHA guidelines or the lender’s guidelines depending upon the reverse mortgage program. If the house needs to be repaired, the lender may require you to fix it prior to closing. A repair set-aside may be issued if they allow you to repair the home after closing.

10. What is a repair set-aside?

If repair work is done after the close of escrow, the lender will hold one and a half times the amount of money it costs to repair the item. Once the work has been completed, a final bill will be submitted to the lender, which will disburse payments to the
appropriate parties.

11. Does the bank hold title to my house while my reverse mortgage is outstanding?

No, the person receiving the reverse mortgage must be on the title during the course of the loan.

12. Am I limited as to how I can use the money
I receive from a reverse mortgage?

You can use your money however you like. Borrowers have used a reverse mortgage for vacations, home modifications, healthcare, education for grandchildren, new cars and to supplement retirement income. It’s your money to use as you wish.

13. If my spouse isn’t 62, will they remain on
the title?

All parties on the title must be at least 62 years of age in order to receive a reverse mortgage. If you are considering removing someone from the title to obtain a reverse mortgage, please seek legal counsel and a tax consultant regarding your particular scenario.

14. Does a non-borrowing spouse need to sign
any documents?

Yes. A non-borrowing spouse must sign a Non-Borrowing Spouse (NBS) Certification, Notice of Right to Cancel Riders (if necessary), Truth in Lending, the HUD and the Deed(s) of Trust. If there is a trust on the property, additional signatures may be required.

Contact us for more information on reverse mortgages, title insurance and to find out why we’re the right title company for you.

 

The content in this flyer is intended for general information only. Consult with your HUD office and/or attorney for advice on your specific transaction. 


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