Reverse Mortgage Frequently Asked Questions
How Much does a Reverse Mortgage Cost?
Depending on your loan amount, costs can range from as little as nothing( Lenders can provide a credit to offset closing costs) to 6% of your loan amount. For more Reverse Mortgage FAQ check out our home page.
Do We Have To Pay A Reverse Mortgage Back?
The loan is due and payable after the last surviving spouse or borrower has passed on or is no longer living in the property. This applies only if the taxes, insurance and HOA(Homeowners Association) , if applicable, have been paid and the property is kept up to FHA standards.
What Can I Due With The Proceeds I Receive From A Reverse Mortgage?
Proceeds can be used for any purpose without restriction, including, medical bills, credit cards, loan payoffs, extinguishing your current mortgage(s), healthcare expenses, travel and any other use of your choice.
Will There Be A Monthly Payment?
No, Taxes, insurance and HOA, if applicable, are required to be paid, but, the lender expects that the property value will be high enough to cover the initial loan plus interest.
Does The Bank Own The Home With A Reverse Mortgage?
The Bank offers the loans as a way to earn interest on the monies lent, not to own the property. So, no, the bank does not own your home with a Reverse Mortgage. Banks or Lenders will file a lien the same way a “forward” mortgage does. This allows them to secure the loan with the real estate the Reverse Mortgage is taken out against.
What Happens When I/We Pass Away?
Your estate still inherits the property, but the note on the Reverse Mortgage will become due and payable normally within 1 year. The amount due will be the Principle Balance, Interest over the life of the loan and any service fees.
For Example, If your home value at your demise is $175,000 and you have a loan balance of $60,000 on the Reverse Mortgage, your estate can sell the home for $175,000, pay off the $60,000 to the bank, and keep the $115,000 difference, minus any realtor fees, closing costs etc.
Is a Reverse Mortgage a “Non-Recourse” loan?
Yes, A Reverse Mortgage is a “Non-Recourse” loan, meaning, the lien on the property is only attached to the property and will not be passed on to the estate if the home sells for less than the balance of the Reverse Mortgage. Their is no liability from the estate to pay the difference.
Can the Owner Be Forced Out of The Home?
Since their are no mortgage payments, , as long as the property taxes, homeowners insurance, HOA( if applicable) and the property is maintained as well as it remaining your primary residence, the homeowner(s) cant be forced out.
Will this affect My Social Security Or Medicare?
Social Security and Medicare are not affected. However, need-based programs like Medicaid can be affected on a case-by-case basis. It is always recommended to consult with a tax professional to see if a Reverse Mortgage can affect eligibility of government benefits.
Do I have to Pay Taxes on Money I Receive from A Reverse Mortgage?
Proceeds from a Reverse Mortgage are not income and are non-taxable. Always consult a tax professional for more information.
Is a Reverse Mortgage like a Home Equity Loan?
Only in that they both use the properties equity as collateral. The biggest difference is that you must be at least 62 years old to apply for a Reverse Mortgage. Also, A Home Equity Loan must be repaid over 5-20 years normally, whereas, A Reverse Mortgage is generally not paid back until the homeowner(s) pass away or no longer occupy the property for 1 year or more.
My Parents Recently Passed Away and Had A Reverse Mortgage On the Home, What Should I do?
Contact the Lender to give them Notification. Your options, as their heir(s), can be discussed with the current lender.