Facts about Reverse Mortgages

Do not loose or risk your Money and/or Your Home’s Equity. Contact your attorney, tax professional before signing any mortgage documents. Interest on reverse mortgages is not deductible on income tax returns until the loan is re-paid in part or in full.

Most people have all heard about Reverse Mortgages The Reverse Mortgage has been around for years. A Reverse Mortgage has helped thousands of homeowners, 62 year and older to remain in their homes. With a Reverse Mortgage you have No Monthly Mortgage Payments. This does NOT mean “no expenses”, you will still be responsible for the maintenance, real estate taxes and home insurance.

There are a broad range of benefits when you utilize a Reverse Mortgages. There are no income requirements or  income limits, nor any credit checks, when you apply for a FHA Insured Reverse Mortgage. Even if you are currently behind on your mortgage payment you may qualify for a Reverse Mortgage. A Reverse Mortgage may prevent a foreclosure. A HECM or Reverse Mortgage is a lien on your property. If a home is in foreclosure you may be required to escrow takes and homeowners insurance.

A Reverse Mortgage comes in different options that allow the borrower to take a lump sum payment or to receive a line of credit to be utilized,  as they deem necessary. Although there are no income requirements or limits, nor any credit checks to qualify for the loan, the borrower may have to show ability to pay taxes and home owners insurance.

Again, when you receive a Reverse Mortgage you are still responsible for a insuring the home, paying taxes and maintenance. Because the initial cost of a Reverse mortgage can be expensive it is recommended that you, your spouse and perhaps your family consult with a financial planner or lawyer prior to signing any documents. It is required that you attend a HUD approved  HECM/Reverse Mortgage Counseling Class and receive a certificate of completion prior to placing a mortgage application with a lender.

Two River Mortgage & Investment always recommends you ensure that your mortgage loan officer is Licensed or Registered with the NMLS. (http://www.nmlsconsumeraccess.org/)

The Reverse Mortgage allows a qualified homeowner to convert a portion of the available equity in their primary residence, into cash, without being forced to lose their home, to be forced to sell their home, or to become further burdened by additional debt resulting from the accruing from a traditional first mortgage.

 

A Reverse Mortgage vs. a Conventional Fixed Rate Mortgage

As you have probably experienced with a Conventional mortgage, the borrower makes scheduled monthly mortgage payments to a servicing company. In general you may have a predetermined schedule of payments for a period of time, ie. 15 yrs or 30 yrs. In this case your payments remain constant throughout the term of the loan.

In general with a HECM Reverse Mortgage, the borrower will receive money from the mortgage lender and you generally will not be required to make any payments for as long as you reside in the home. Instead, the loan must be repaid when you pass, sell your home, or no longer live there as your principal residence.

You always reserve the option to pay off the Reverse mortgage, should you so desire. A reverse mortgage does not remove you from ownership of your home. A Reverse mortgage offers the homeowner(s) who have an abundance of equity in their homes, the ability to utilize the equity in their homes to meet their ongoing financial obligations without the burden of a mortgage payment.

To qualify for most reverse mortgages: you must be at least 62, have sufficient equity in your home and live in your home as a primary residence. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no

The three General Reverse Mortgage Programs:

  • The single-purpose reverse mortgages, traditionally offered by some state and local government agencies and nonprofit organizations for a specific need.
  • HUD federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECM’s), and are backed by HUD
  • Proprietary reverse mortgages, which are private loans that are backed by the

Loan Features

Reverse mortgage loan advances are not taxable income. (Consult your tax advisor). Your property equity is the similar to a savings account. Generally reverse mortgages do not affect Social Security or Medicare benefits, again consult your advisor prior to signing any mortgage documents. You retain the title to your home and do not have to make monthly re-payments.

Under the HUD backed Reverse Mortgages HECM program, there is a clause that allows for a borrower to be allowed to live in a nursing home or similar medical facility for up to 12 months
before the loan becomes due and payable.

A HECM Reverse Mortgage must be repaid only when the last surviving borrower either dies, sells the home, or vacates the home as a principal residence.

All prospective borrowers must understand the following:

Mortgage Brokers and Mortgage Lenders generally receive origination fees as compensation for the origination of a reverse mortgage. Mortgage Lenders also may charge servicing fees during the term of the mortgage.

Buyer Beware

Be cautious if anyone tries to sell you financial products, like an annuity, and suggests that you utilize a reverse mortgage to fund the financial product, immediately consult a non related attorney or financial planner.

Should you receive this type of advise, consult a second, non associated financial advisor.

Reporting Possible Fraud

If you suspect that anyone is violating the law, let the counselor, lender, or loan servicer know.

Then, file a complaint with:

  • your state Attorney General’s office or State Banking regulatory agency
  • CFPB at whistleblower@cfpb.gov
  • the Federal Trade Commission (FTC). You can do that online at ftc.gov or by phone, toll-free, at 1-877-FTC-HELP (1-877-382-4357).

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