How much cash can I receive from the equity in my home?
The amount depends on three factors:
- The age of the youngest borrower
- The current value of your home, the sales price if you are purchasing a home, or the FHA maximum lending limit, whichever is lower
- The current ‘expected’ interest rate
These three factors determine your cash equity benefit (the gross amount of money available). The actual net cash available is then determined by deducting any existing mortgages and deducting the closing costs of the reverse mortgage.
Are there any restrictions on how I use my money?
No! You can use the money any way you desire—it’s your money!
What are the most common reasons seniors get a reverse mortgage?
There are an infinite number of ways seniors utilize the proceeds from a reverse mortgage, ranging from practical to fun. Here are just some of them:
- Eliminate monthly mortgage payments
- Home repairs or home remodel
- Pay for in-home health care
- Pay for medical bills or pay for prescription medications
- Payoff credit cards or other debts
- Cover daily living expenses
- Travel
- Help their children buy a home or assist other family members
- Assist grandchildren with their college education
- Purchase items you have always wanted or needed
If no monthly payments are required, how is the reverse mortgage paid back?
The loan is due and payable when the borrower sells the home, permanently leaves the home (12 months or more), or all parties on the title have passed away. The passing of the last party on the title triggers the repayment. The heirs have a maximum of one year (with exceptions) to pay off the loan.
What if I want to leave the home to my children?
It is your home, so you can leave it to your children or to anyone you choose. However, the loan is not assumable (it can’t be taken over by someone else). Your heirs can pay off the loan any number of ways including selling the home. If they wish to keep the home, they would need to refinance it and pay off the reverse mortgage loan in full.
What if I owe more than my home is worth?
Reverse mortgages are “non-recourse,” which means the lender cannot collect more money than the home is worth, regardless of how much is owed and they cannot seek other assets to pay for the debt. This is an excellent protection for you. If the heirs wish to keep the home then the lender is entitled to all that is owed including interest and closing costs.
Can I hold title in a Living Trust?
Yes, the trust must meet HUD guidelines and be approved by the lender. If you would like to confirm your trust is acceptable for a reverse mortgage, you can click here to contact us and we can review it for you FREE of charge.
What do the experts say about this program?
Many financial advisors and senior advocates, including the National Council on Aging, suggest that a reverse mortgage can be a smart way to secure your financial future during retirement. Visit our senior resources page to see what other senior advocacy organizations are saying.
Are there costs associated with a reverse mortgage?
As with any loan, there are closing costs associated with obtaining a reverse mortgage. Standard costs include: the lender loan origination fee, HUD required counseling, FHA mortgage insurance, and 3rd party fees such as title, escrow, and appraisal. All of the above costs are limited and regulated by HUD (Department of Housing and Urban Development).
Will I have to pay taxes on the money I receive?
The IRS does not consider proceeds from a reverse mortgage to be taxable income. They are considered loan advances on your equity and are not taxed. (We recommend consulting a tax professional.)
Is the interest charged on the loan tax deductible?
The interest is deductible at the time the loan is paid in full. (We recommend consulting a tax professional.)
Will a reverse mortgage affect my Social Security or Medicare benefits?
Payments you receive do not affect your Social Security or Medicare benefits. However, in the Federal Supplemental Security Income Program there are specific requirements for certain programs such as Medicaid. Therefore, we suggest that you consult a benefits specialist in your area to determine if you would be affected.
If you would like to see if a Reverse Mortgage is right for you call Sheila Karlowsky at 223-1032
