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Reverse Mortgage Frequently Asked Questions:
- Question: Are reverse mortgages just for desperate seniors?
Answer: The reverse mortgage is an excellent financial planning tool that is used by homeowners from all walks of life to enhance their retirement years. While some have needed a reverse mortgage more than others, the growing popularity of the product is eveidence of its benefit in a wide array of financial circumstances.
- Question: Must my home be debt-free to qualify for a reverse mortgage?
Answer: Even seniors with an outstanding first mortgage or other debt on their home may qualify for a reverse mortgage. The proceeds of the reverse mortgage, though, must first be used to pay off such debts.
- Question: Will the bank own the home after you get a reverse mortgage?
Answer: You own your home and retain title throughout the life of the reverse mortgage, just the same as with a regular home purchase mortgage. Once you permanently move out of your home or pass it to your estate the loan must be repaid.
- Question: When a reverse mortgage comes due, will the bank sell the home?
Answer: When the loan must be repaid, you or your heirs can either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.
- Question: Am I eligible for a reverse mortgage?
Answer: To qualify for a reverse mortgage, you must be at least 62 years of age. In the case of a couple, both must be 62. You may qualify even if you have an outstanding balance on your first mortgage. Reverse mortgages are available only for homes occupied by owners as a principal residence.
- Question: How much money can I get?
Answer: This depends on a few factors, including your age, the value of your home, the equity in your home and the interest rates at the time.
- Question: What are my payment options
Answer: You decide how to receive the money generated by a reverse mortgage. Your payment options are; An upfront lump sum, a line of credit, fixed monthly payments for as long as you remain in your home, or if you choose a combination of the options.
- Question: How much does a reverse mortgage cost?
Answer: Many of the same costs associatied with a regular mortgage apply to reverse mortgages. You will be charged an origination fee, a mortgage insurance premium, 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, so that you incur little out-of-pocket expense.
- Question: Do I need to get an appraisal of my home to get a reverse mortgage?
Answer: Yes. Since the value of your home is a factor in determining how much money you can get from a reverse mortgage, an appraisal is required. Normally, the lender will order the appraisal, which is paid for by the borrower at the time of application.
- Question: Do I need a lawyer to apply for a reverse mortgage?
Answer: Legal counsel is not required. However, Republic Mortgage Home Loans encourages you to seek advice of a legal, tax, or financial advisor before committing to a reverse mortgage.
- Question: Am I required to receive counseling before I get a reverse mortgage?
Answer: Yes. Counseling is required for all reverse mortgages. The couselor's job is to make sure you are informed about reverse mortgages and other options. Republic Mortgage can help provide names of couselors who are independent and approved by FHA to provide reverse mortgage counseling.
- Question: Is the money from a reverse mortgage taxable income? Will it affect my Social Security or other government benefits?
Answer: Funds fiom a reverse mortgage are tax-free; it's your money, not additional income. A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you receive a lump sum payment from a reverse mortage, any amount retained the month after you get it would count as a resource and could affect Medicaid eligibility. To be safe, consult a Medicaid expert.
- Question: Am I required to pay anything during the course of the reverse mortgage loan?
Answer: No. The flow of payments is reverse during the term of the reverse mortgage - the lender pays you. However, you are responsible for keeping up payments on your homeowner's insurance and property taxes, and to maintain the condition of your home.
- Question: Are there any limits on how I can use the funds from a reverse mortgage?
Answer: No. Borrowers have used reverse mortgages for a variety of purposes, including paying health care expenses, supplementing retirement income, financing home improvements or modifications, traveling or just day to day expense. Some have used reverse mortgages to eliminate expenses by paylng off mortgages and credit card debts.
- Question: How much will be owed when my reverse mortgage comes due?
Answer: The amount owed includes the amount borrowed to date, the amount of accrued interest, accrued mortgage insurance premiums, servicing fees and any other costs and fees financed as part of the loan. In no event will the repayment amount exceed the value of the home at the time the loan comes due.
- Question: What happens if I move out of my home after I get a reverse mortgage?
Answer: When a borrower dies or permanently moves out of the home, the reverse mortgage comes due and must be repaid. Likewise, if you sell your home, the reverse mortgage comes due.
- Question: What happens when my home gets passed to my heirs?
Answer: Once your home is passed to your heirs, the reverse mortgage comes due. Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage. If they sell the home, they get to keep any excess sales proceeds.
- Question: Where can I get a reverse mortgage?
Answer: Republic Mortgage Home Loans, LLC is one of the largest, locally owned mortgage companines in the interrnountain states and can assist you with all your mortgage needs, including reverse mortgages.
The U. S. Department of Housing and Urban Development (HUD) developed the Home Equity Conversion Mortgage (HECM), Reverse Mortgage to enable home owners age 62 and older to convert a portion of the equity in their primary residence into TAX-FREE income without giving up ownership of their home and without the requirement of making monthly mortgage payments.
- SAFE - Government Inusred
- TAX-FREE
- YOUR NAME REMAINS ON TITLE
- YOU NEVER MAKE MORTGAGE PAYMENTS
The Home Equity Conversion Mortgage (HECM) is insured by the Federal Housing Administration (FHA) and allows homeowners
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