Question # 1: At what age am I eligible for a reverse mortgage? Answer # 1: All parties on title must be at least 62 years old.
Question # 2: How can I take my money? Answer # 2: The benefits can be taken in various ways: a lump sum, a monthly payment, a term (certain amount of years) or a line of credit. The unused portion in the line of credit grows with the HECM loan. You can also do a combination of plans (i.e., a monthly income AND a line of credit).
Question # 3: What fees or costs are involved? Answer # 3: There are fees and costs to set up the Reverse Mortgage, however, these are typically included as part of the loan balance, which can be financed. FHA charges 2% of the appraised value or the maximum lending limit, whichever is less. Then there is an origination fee and the normal closing fees, such as title, escrow, recording, appraisal, termite, etc.
Question # 4: Are the payments I receive taxable? Answer # 4: No! The payments are not subject to income tax because you are just borrowing on your home. You paid for your home once, you should not have to pay for it again.
Question # 5: How will the interest rate affect my payments? Answer # 5: The interest rates will be set the week that the loan is closed. If you are getting a monthly payment, the payment will be set regardless of the interest rates. The interest rates affect the balance of how much is due at the end of the loan term. The interest on this loan adjusts monthly. The rate is based on the 1-year T-Bill plus a 1.50 margin.
Question # 6: What is the monthly servicing fee? Answer # 6: The loan servicer charges a monthly fee for servicing the loan. When the loan closes, there is an amount "set aside". It is called a "servicing set aside". This way, the servicer doesn't have to go to the borrower every month to request money. FannieMae distributes the monthly fee to the servicer for that particular borrower on a monthly basis.
Question # 7: Will the reverse mortgage affect my social security and income taxes? Answer # 7: No! It won't affect either one. It will affect SSI if you have over $2000 in the bank account at the end of the month for a single Borrower or $3000 in the bank at the end of the month for married Borrowers.
Question # 8: Do I still pay property taxes and insurance? Answer # 8: Yes! You still have to pay property taxes and maintain your insurance.
Question # 9: How do I get the money? Answer # 9: You can receive your payments with a monthly check or an automatic deposit that you would receive like your Social Security check. If you want the money deposited directly into your account, you would need to provide a voided check to submit to the servicer.
Question # 10: Can the borrower obtain the appraisal? Answer # 10: Yes. The appraiser must be an FHA-approved appraiser. A copy of the appraisal will be included in your closing documents.
Question # 11: What happens to my spouse if I pass away first? Answer # 11: If your spouse is a legal co-owner of the home, he or she can continue to live in the house, and continue to receive the existing benefits. Repayment would not be required until your spouse passed away or decided to move. At that time the loan balance would be due and payable.
Question # 12: If I choose to receive the regular monthly payments, will the reverse mortgage stop paying me once I have reached a certain age or once I have received a certain amount of money? Answer # 12: No! You will continue to receive the same monthly payment for as long as you live in your home.
Question # 13: Who sends me the payments? Answer # 13: The servicer will send the monthly payments out on the 1st of every month and should be arriving about the same time as Social Security payments. The servicer is Futura Financial and the Servicing Department is located in Corona, CA.
Question # 14: What if I decide to sell my property? Answer # 14: If you choose to sell your property, the outstanding loan balance becomes due and payable. You or your estate will receive any proceeds exceeding the loan balance.
Question # 15: If my home appreciates in value during the mortgage term, who will be entitled to that money? Answer # 15: Under the FHA Home Equity Conversion Mortgage (HECM) and the Fannie Mae "HomeKeeper "program, you are to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.
Question # 16: Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home? Answer # 16: Absolutely not! As long as you continue to occupy the property as a principal residence, you will not be forced to sell or vacate your home, even if the total of the mortgage payments made to you, plus interest, exceed the value of the property. No deficiency judgment may result from your loan. FHA or Fannie Mae insurance covers any further financial obligation to the lender.
Question # 17: When is the loan due? Answer # 17: When none of the borrowers remain in the home, the loan is due. Your family or heirs can sell the house or refinance the house and pay off the loan as with any other loan on the property.
Question # 18: What if I move out for a while will the loan become due? Answer # 18: FHA's policy states that if a borrower is out of the house for 12 consecutive months, he or she will probably not be coming back and the loan becomes due.
Question # 19: What if I owe more money than the property is worth? Answer # 19: If the loan balance is greater than the value of the home, the family can give the house back to FHA or Fannie Mae. It is a non-recourse loan, which means the house stands for the debt. There will never be a debt to your heirs. If there is money left after paying off the existing loan, your family or your heirs receives the money.
Question # 20: How long do my heirs have to sell the property? Answer # 20: As long as your heirs are marketing the property in good faith, the servicer will allow three-month periods, up to one year on the FHA product.
*must meet all FHA guidelines.
Call us today to discuss your individual needs and see if a reverse mortgage is right for you.
