Understanding "Reverse Mortgages" for Seniors "HECM" FHA and HUD Regulated Refinance Programs for Michigan Seniors

Services for Real Estate Pros with Pillar Financial Corporation


Reverse Mortgage Fact Sheet

1. Definition: A reverse mortgage is a unique financial tool that enables homeowners ages 62 and over to tap into their home's equity, receiving either a monthly income, lump sum of cash or a line of credit. There are no income or credit qualifications and there is no repayment until the homeowner permanently leaves the home. The borrower retains full ownership of the property.

2. Qualifications: Applicant(s) must be at least 62 years of age and must own their home free and clear or nearly free and clear - in many cases borrowers use the reverse mortgage to pay off existing liens or mortgages, which eliminates their monthly loan payments. Borrowers must also live in their home as their primary residence.

Mobile homes have specific requirements that must be met in order to be eligible for reverse mortgages. Please contact us for a list of these requirements. Commercial properties are currently ineligible for reverse mortgages.

3. Determination of Loan Amount: The loan amount is based on the home value, the number and age of the homeowner(s), the current interest rate and the maximum allowable home value.

The maximum allowable home value varies depending on the reverse mortgage program selected. The FHA-Insured Reverse Mortgage Program has limits, called Maximum Claim Amounts, ranging from $132,000 to $239,250. This amount varies by county. The Fannie Mae Home Keeper program has a nationwide limit of $275,000.

4. Counseling: All borrowers are required to receive free counseling from a third-party counseling agency prior to applying for a reverse mortgage. Your local Correspondent Lender has a list of counselors in your area and can refer you to the reverse mortgage counselor nearest you. The counselors often will be willing to do the counseling session over the telephone if you are unable to go to their office.

5. Payment Plans: Reverse mortgage borrowers can choose from several payment plan options:

  • Tenure: Borrower receives a monthly check for as long as they live in the home.
  • Line of Credit: Borrower can draw up to a maximum amount at the times and in the amounts of the borrower's choosing.
  • Lump Sum Cash Advance: A lump sum of cash distributed to borrower at closing.
  • Modified Tenure: Any combination of the above options.

6. Processing Time: On average it takes 6-8 weeks to process a reverse mortgage.

7. Closing Costs: Most closing costs are financed into the loan. Check with your local reverse mortgage specialist as to how the charges for your appraisal, title insurance, origination fee and recording fees are handled. Your local reverse mortgage specialist will be happy to provide you with a Good Faith Estimate of Closing Costs when they meet with you.

8. Interest Rate: The interest rate charged varies depending on the reverse mortgage program selected by borrower. All programs offer adjustable rates, and have lifetime caps on the maximum allowable rate. Please call your local reverse mortgage specialist for a quote on the current rates.

9. Impact on Income Taxes and Social Security: Proceeds from a reverse mortgage are considered to be a loan, not income. Therefore, the funds received are not subject to income tax and do not affect Social Security Benefits. Borrowers receiving Medicaid or SSI may not be affected if the funds from the reverse mortgage are spent in the month they are received. As always, we recommend you consult your tax advisor for further details.

10. Repayment: The reverse mortgage becomes due and payable at the time the borrower permanently leaves the home. The reverse mortgage can be repaid either from the proceeds of the sale of the property; other liquid assets or the heirs can obtain a conventional mortgage to pay off the reverse mortgage.

The loan balance consists of the financed closing costs, the cash that was advanced to the borrower and any interest that accrued. Remaining equity belongs to the borrower or their heirs. The reverse mortgage is subject to a non-recourse limit, which states that the borrower or their heirs are only required to repay the loan balance or the fair market value of the home, whichever is less.


Ted Lewicki of Pillar Financial Services specializes in reverse mortgages for seniors.  He will be happy to come to your home for a relaxed conversation about your options.  A reverse mortgage is a type of home equity loan that allows you to convert some of the equity in your home into cash while you retain home ownership. Rather than making a payment to your lender each month, the lender pays you. Unlike conventional home equity loans, most reverse mortgages do not require any repayment of principal, interest, or servicing fees for as long as you live in your home. Funds obtained from a reverse mortgage may be used for any purpose, including health care, housing expenses, taxes and insurance, fuel, and maintenance costs.  http://www.pillarmortgage.com/


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