Questions you should be asking about your Reverse Mortgage
Reverse Mortgage is a way homeowners over the age of 62 are using the equity in their home to add to their retirement funds. The benefits of using a reverse mortgage include extending retirement fund longevity, eliminating a mortgage payment, or even making needed accessibility changes to the home. But those are only a few ways that reverse mortgage funds can be used, and we see every day how this financial tool is being used to benefit seniors. We have found there are also many questions that are being asked, and should be asked. Here are the top ones:
How do I receive my reverse mortgage funds?
You have options that include monthly payments, monthly payments for a period of time, line of credit, lump sum and a combination. Funds are paid out upon the first of the month after the loan has been funded. The funding of the loan can be the same month of closing or the following month. If you choose a line of credit option, funds are available to you from that within 5 days.
Am I able to change my reverse mortgage funding option?
Yes, you have options in how you receive your funds, and you can change that. You will need to talk to your loan advisor to discuss this change, as there could be associated costs.
I know I don’t need to make payments on my reverse mortgage, but what if I want to?
It is important you speak to your mortgage professional about any payments you want to make. They can advise you on how the funds will be applied as well as the options you have. There is no penalty for payments towards the reverse mortgage, but we want to be sure they make sense and are meeting your overall goals.
How much time do I need to spend in my house for it to be considered my primary residence?
You are required as part of your reverse mortgage to confirm that you reside in the home as your primary residence. You will be sent occupancy certificates for you to sign and return to your loan officer.
In order to not default, you need to live in your home for a rolling 6 month period. This means if you live in the home for 6 months and one day, leave for 5 months and 29 days, then move back in, you are considered living in it for the purposes of a reverse mortgage.
What if my home drops in value and I get upside down?
A reverse mortgage is considered a non-recourse loan. Because the loan is based on about 50% of the home’s equity, it is highly unlikely that you could ever owe more that the value of the home. The reverse mortgage debt is limited to 95% of the current appraised value of the home. If you or your heirs decide to sell the home, the reverse mortgage will be paid and any remaining equity becomes yours.
Is there a time when the reverse mortgage will be due and payable?
Yes, in the following cases, known as a maturity event, no more funds will be paid from the reverse mortgage.
- All reverse mortgage borrowers have passed away
- All reverse mortgage borrowers have moved out of the property
- All borrowers have sold the property (or transferred it to a 3rd party)
- The borrower fails to maintain property and/or insurance payments and remedy has not be made
- The home has significant repairs and the borrower isn’t able to make or pay for the repairs.
Talk to your loan officer about any additional maturity events, especially if there are any you are concerned about or want explained more fully.
The FHA (Federal Housing Administration) insures legitimate reverse mortgages and not all homeowners are eligible. If you would like to learn more about reverse mortgages and if they are right for you, contact Certified Reverse Mortgage Planner Kevin Guttman today for a free consultation.