- As a monthly supplement - increase your income.
- All at once - as a lump sum.
- As a line of credit - withdraw cash as needed.
- Or a combination of the above.
Are there any restrictions on what I can do with my money?
None whatsoever. You can use the proceeds any way you choose. After all, it is your money.
Do I have to pay income tax on the proceeds?
The proceeds received from a reverse mortgage are loan advances and are not taxable income. Please consult your tax advisor.
What costs are involved?
The costs associated with getting a reverse mortgage are similar to those of a conventional mortgage. Most costs can be financed from the proceeds of the loan and include origination fee, appraisal, Title Insurance and other closing cost.
How is interest charged?
The interest rate on a reverse mortgage is an adjustable rate and is tied to the 1-year Treasury Index. There is a life-of-the-loan cap on the interest rate. You are not charged interest on monies that have been approved but not yet withdrawn.
If there are no payments, what are my responsibilities?
Like all homeowners, you still are required to pay property taxes and provide property insurance and maintain the home. The home must be your principal residence.
How safe are reverse mortgages?
Reverse mortgages are a very safe income option. Borrower(s) continue to own the home. Fannie Mae guarantees the payments that are made to you and also guarantees you can stay in your home as long as you like.
Reverse mortgages can help you increase retirement income, provide funds for health care, reduce the impact of and provide funding for estate taxes and maximizes legacy asset transfer.
Who really owns my home?
You do. A reverse mortgage is a lien just like a traditional mortgage. Repayment is required when the last surviving borrower sells the house, moves away or dies. The remaining equity in your home, if any, belongs to you or your heirs. None of your other assets will be affected by HUD?s reverse mortgage loan. This debt will never be passed along to the estate or heirs.
What if there is already a conventional mortgage on the home?
The reverse mortgage is often used to pay off an existing loan. Existing mortgages must be paid off at closing.
What?s the difference between a bank-originated home equity loan and a reverse mortgage?
With a traditional second mortgage, or home equity line of credit, 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. No credit or income qualifications are required.
What about a home in a "living trust"?
A homeowner who has put the home in a living trust usually qualifies for a reverse mortgage, subject to review of the trust documents.
Will my right to public benefits be affected?
A reverse mortgage loan will not affect your rights under Social Security or Medicare.
Is the process complicated?
Lenders have worked hard over the past several years to simplify the process. A Loan Counselor will review your goals and objectives and decide on which plan best meets your needs.
Consult with your family members and advisors. Once you are comfortable that you are making a good decision the rest of the process moves quickly.
Who should I look to for advice?
Decide who you trust, and then discuss your intentions with them. It may be your attorney, a financial advisor, AARP, a family member or close friend.
