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Section 2 content…
Frequently Asked Questions
What is a Reverse Mortgage?
A Reverse Mortgage is a home loan that is available to those 62 or older. The government insured HECM Reverse Mortgage Program is the most popular program used today. The loan can be used to pay off a current mortgage, convert equity into flexible disbursements or to purchase a primary residence with help from a reverse mortgage loan. Proprietary reverse mortgages are available for high value properties or properties that do not meet FHA or HUD guidelines.
How are Reverse Mortgage different today?
The HECM Reverse Mortgage program is highly regulated by state and federal laws to make them safe and to protect you. Some recent changes and regulations to the program are;
- You retain title of the home.
- Fees and cost are federally regulated.
- No equity share is allowed, the lender cannot slowly take over your home.
- Non-borrower spouses are protected and can remain in the home if the borrower passes away as long as loan terms are not broken.
- New Financial Assessment Requirement looks at income and credit history of each applicant. A (LESA) Life Expectancy Set Aside can be required to pay future property taxes and homeowners insurance to qualify for the loan.
Who qualifies for a Reverse Mortgage?
- At least one borrower must be 62 years of age.
- The home must be a primary residence and an eligible property type.
- You must have sufficient equity in your home.
- You must meet the financial assessment requirement.
Does the bank own my home?
No, the Homeowner actually never gives up ownership of the home. This is a false claim that many initially believe about reverse mortgages. A lender cannot take over any ownership of the property at any point. You are free to sell the home or payoff the reverse mortgage at anytime.
Are their restrictions on how loan proceeds are used?
No, the proceeds can be used in any way once the loan is closed. However if a mortgage exists on the home, loan proceeds can first be required for the mortgage payoff, or if a borrower does not pass the financial assessment a (LESA) Life Expetency set aside can be required to pay future property taxes and homeowners insurance on the property to qualify.
What happens when a Reverse Mortgage becomes due?
After you no longer live in your home or when the last borrower passes away, the reverse mortgage becomes due.
You or heirs have two options:
- Sell the home and receive the difference between the sales price and the loan balance. You will not be liable for any shortfall if the loan amount exceeds the sales price.
- Pay off the balance including accrued interest with cash or financing to retain ownership of the home.
*Your loan may also become due if you do not continue meeting the terms of the loan. (For example, not paying property taxes and homeowners insurance)
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