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What is a Home Equity
Conversion Mortgage?
What does it cost?
Do I still own my home?
When does the Reverse
Mortgage need to be repaid?
What happens if my home
requires repairs?
What is required to be
eligible for a reverse mortgage?
What type of homes are
eligible?
What’s the difference
between a reverse mortgage and a bank home equity loan or second
mortgage?
How much money can I get
from my home?
How do I receive my
payments?
What if I have bad credit?
Do I have to pay income tax
on the money received from the reverse mortgage?
Will there be anything left
for my children when we leave the home?
What is a Home Equity Conversion Mortgage?
This special type of loan was designed
just for Seniors and is commonly called a Reverse Mortgage. However,
this program is the only Reverse Mortgage regulated by
HUD (The
Department of Housing and Urban Development) and insured by the FHA
(The Federal Housing Administration). With this program, you retain
title to your home and you receive any and all appreciation in the
value of your home.
What does it cost?
Loan costs and fees are regulated by
a government agency. Typical mortgage closing costs such as
appraisal, credit report, title insurance, loan origination fees,
FHA insurance premium and recording fees can be financed into the
mortgage which would mean no out of pocket expense to you.
Do I still own my home?
YES! You retain full ownership of
your home and your name remains on the title. HECM Reverse
Mortgages are safe because they are regulated by HUD and insured by
FHA.
When does the Reverse Mortgage need to be
repaid?
Upon the death of the last remaining
borrower, the home passes to your heirs and they may either
refinance and keep the house or sell and keep all of the remaining
equity.
What happens
if my home requires repairs?
If any repairs are required, they will
be completed during the Home Equity Conversion process and all the
repair expenses can be funded into the mortgage, which again means
no out of pocket expense to you.
What is required to
be eligible for a reverse mortgage?
HUD requires that the borrower, or
homeowner, is 62 years of age or older; owns their home outright, or
have a low mortgage balance that can be paid off at the closing with
proceeds from the reverse loan; and must live in the home. You are
also required to receive consumer counseling from a HUD-approved
counseling source prior to obtaining the loan. This can be done
over the phone from your home.
What type of home is eligible?
Your home must be a single family
dwelling, or a two-to-four unit property that you own and occupy.
Townhouses, units in some condominiums and some manufactured homes
are also eligible. Your Senior American Funding representative can
help you determine this.
What’s the
difference between a reverse mortgage and a bank home equity loan or
second mortgage?
With a traditional second mortgage, or
a home equity line of credit, (also known as forward mortgages) you
must have sufficient income versus debt ratio to qualify for the
loan, and you are required to make monthly mortgage payments. The
reverse mortgage is different in that it pays you, and is available
regardless of your current income. You are not required to pay it
back until you no longer use your home as your principal residence.
How much money can I get from my home?
The amount you borrow depends on your
age, the current interest rate, the appraised value of your home, or
FHA mortgage limits for your area, whichever is less. Generally,
the more valuable your home is, the older you are, and the lower the
interest, the more you can borrow.
How do I receive my payments?
You have six options:
1.
Tenure – equal monthly payments as long as least one borrower
continues to occupy the property as a principal residence.
2.
Term – equal monthly payments for a fixed period of months selected.
3.
Line of Credit – Unscheduled payments or installments, at times and
in amounts of borrower’s choosing until the line of credit is
exhausted.
4.
Modified Tenure – combination of line of credit with monthly
payments for as long as the borrower remains in the home.
5.
Modified Term – combination of line of credit with monthly payments
for a fixed period of months selected by the borrower.
6.
Lump sum – Borrower may choose to take the entire amount available
in one lump sum to use as he/she chooses.
What if I have bad credit?
Your credit rating is not a
consideration in the approval process of a reverse mortgage. (A
credit report is done only to check if you owe the government
money. If you do the amount owed will be paid from the reverse
mortgage.)
Do I have to pay income tax on the money
received from the reverse mortgage?
No. Equity in your home is not considered
income.
Will there be anything left for my children
when we leave the home?
Upon the death of the last remaining
borrower, the home passes to your heirs and they may either
refinance and keep the house or sell and keep all of the remaining
equity.
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