WHAT IS IT?
The reverse mortgage is a national program available to homeowners age 62 and older providing you access your home's equity without having to make a monthly mortgage repayment. You must continue occupying your home as your primary residence and continue paying your property taxes and homeowners insurance. The most popular reverse mortgage program is called the HECM which stands for Home Equity Conversion Mortgage and is insured by the FHA (Federal Housing Administration).
HOW MUCH CAN YOU QUALIFY FOR?
The amount of funds available through a reverse mortgage loan is based on the youngest spouses age and the appraised value of your home. As a rule of thumb the loan to value (LTV) offered on a reverse mortgage is 40-70% of your appraised value, depending on your age and current interest rates.
DOES THE BANK TAKE TITLE TO MY HOME?
No, the bank does not own your home. You retain the same ownership and title that you have today. The reverse mortgage is just a loan like any other type of mortgage but with the extra ability to defer the interest charges rather than making mandatory monthly repayments. At any time, you may repay the interest, refinance, or sell your home without penalty. You will always receive a monthly statement that will outline your interest charges and activity. At the end of the day FHA is the entity who is insuring your loan for your lifetime. Because of the national MIP fund, you are guaranteed that if a lender should go out of business in the future your loan will be transferred to another servicer and honored for your lifetime. Your loan information will always be made available to you and you can stay in your home providing that you continue maintaining your property tax and insurance, regardless of how long you live or what your home value appreciates.
WHEN DOES THE REVERSE MORTGAGE NEED TO BE PAID OFF?
When you sell the property or No longer occupy your home as your primary residence for a period of 12 months or longer or fail to maintain the property taxes and homeowner’s insurance. When the last surviving borrower should pass away the reverse mortgage becomes due and payable. Generally, your heirs/estate will have up to six months to refinance your home if they are choosing to keep the house or up to 12 months to sell.
WHAT DOES THE LENDER EXPECT FROM ME?
You must pay the property taxes and the homeowners’ insurance and any homeowners association dues you may have. And of course, the lender expects you to continue to occupy the property.
I CURRENTLY HOLD TITLE IN A TRUST, CAN I KEEP IT THAT WAY?
Yes, you can hold title in a trust but the lender and title company do require that they review the trust, and it must be approved. If you hold title in a trust you should let your Certified Reverse Mortgage Professional (CRMP) know up front so he/she can get a copy of the trust and have it reviewed immediately so that there are no surprises later. Most trusts are prepared with lenders and their requirements in mind, so they are not a problem, but it is best to know as early on as possible.
WHAT DOES MY CREDIT SCORE HAVE TO BE TO QUALIFY?
Reverse Mortgages do not use credit scores. Credit guidelines are very different than traditional loans. Each credit profile needs to be examined on a case-by-case basis to determine if credit issues would exclude a borrower from getting a reverse mortgage.
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