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Reverse Mortgage

 

Reverse Mortgage - Facts

A Home Equity Conversion Mortgage (HECM), or Reverse Mortgage, is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid back to you. Unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
What are the benefits of a Reverse Mortgage?
  - Tax free income from your home.
  - More money in your pocket to do what you want with, such as travel.
  - You will still own your home!
  - No monthly mortgage payments required.

Frequently Asked Questions:     
1. What types of homes are eligible? 
Single-family, 2- to 4-unit multifamily, modular, Planned Unit Development (PUD) and condominium homes are eligible. Manufactured homes may be eligible. The property must be your primary residence.
2. What if I have an existing mortgage? You may be eligible for a reverse mortgage even if you still have an existing mortgage. However, the existing mortgage will need to be paid off with your reverse mortgage proceeds or from another allowable source.
3. Are there homeowner’s insurance and property tax requirements? Yes, it is your responsibility to maintain an acceptable amount of property insurance, including flood insurance where necessary. You are also responsible for paying your property taxes.
4. Can I use a reverse mortgage to purchase a home? Yes, you can use the proceeds to purchase a home. You would need to make a down payment and apply the proceeds from your reverse mortgage at the time of purchase. The down payment is determined by the home value minus the amount of proceeds received from the reverse mortgage (after subtracting loan costs). You will not need to make monthly reverse mortgage payments while you live in the home or until a maturity event occurs.
5. What are the costs of a reverse mortgage? Costs include origination and processing fees, third-party closing costs (just like a first mortgage) and possibly FHA mortgage insurance. Most of these costs can be financed into the loan, and may vary depending upon which product you select. In addition, there may be a counseling fee that will be collected up front or financed within the loan.
6. How much of my home’s equity can I access? Loan amounts vary based on the reverse mortgage product chosen, the ages of the borrowers, the appraised market value of the home and current interest rates.
7. How will I access the proceeds from my reverse mortgage? Access methods vary based on which product you select. You can choose to receive the proceeds in a single lump sum, through regular monthly installments, by drawing from a line of credit at your discretion or any combination of these options.
8. How can I use the proceeds I receive? You can use the proceeds for anything you choose. For example: you can pay for medical, prescription and long-term care costs, make home improvements, cover unexpected expenses, etc. The decision is yours.
9. Are the proceeds I receive taxable? Loan advances from a reverse mortgage are generally not considered taxable income. This means the proceeds you receive from a reverse mortgage are generally tax-free. Please consult a tax professional.
10. When will the loan become due? Circumstances that cause the loan to become due include, but are not limited to: 1) the last surviving borrower(s) permanently moves out of the home or passes away; 2) the last remaining borrower(s) fails to live in the home for 12 consecutive months; 3) the borrower(s) fails to pay the property taxes or insurance; or 4) the property deteriorates beyond what is considered reasonable.
11. If I decide to pay back the loan early, will I incur any penalties? No. The loan can be paid back at any time, and you will not be charged any fees for paying early.
12. Can I still leave my house to my kids? Yes, you can leave your home to your heirs. Your home will always remain your home. You may leave it to whomever you wish. When you pass away your heirs will have options for paying off the loan. After the debt is repaid, any remaining equity (if they choose to sell it) will go to your heirs.
13. Who will help me through this process? A dedicated Viewpoint Mortgage reverse mortgage specialist is available every step of the way to answer your questions and help ease any concerns you have.

Reverse Mortgage - Options
A HECM Reverse Mortgages can be used as refinance vehicle for an existing home that is free and clear or a home with an existing mortgage. The HECM can also be used purchase a home which will not require mortgage payments. The program is available with both fixed and adjustable interest rates.

HECM Refinance to Pay off an Existing Mortgage: A senior can refinance their existing mortgage using a HECM reverse mortgage which is designed to pay off their mortgage and eliminate monthly mortgage payments. The client can now save this cash flow every month, increasing their monthly cash flow and raise their quality of life. The amount of the reverse award used to pay off their existing mortgage is a function of how much equity there is in the home and the age of the youngest borrower. This option is available in fixed rate or adjustable rate formats.

Purchase a Home using a Reverse Mortgage
Refinance and Receive a Lump Sum of Cash: This option allows the senior to refinance into a HECM reverse mortgage that will give them a lump sum of cash at closing. This option can be used in combination with paying off their existing mortgage explained above if there is adequate equity available to do so. The amount of the reverse award available to the client is a function of how much equity there is in the home and the age of the youngest borrower. This option is available in fixed rate or adjustable rate formats.

Refinance and Receive a Line of Credit: This option allows the client to refinance into a HECM and structure the reverse proceeds into a GROWING Line of Credit. A unique feature of the HECM Line of Credit option is that the line of credit actually grows every year by a specific growth factor approximately between 3% to about 4% per year. This option can be used in combination with paying off an existing mortgage explained above and also can be structured with a portion of the reverse proceeds in the form of a lump sum. This option is beneficial to clients that may not need or want a lump sum of cash at closing or may just desire a smaller lump sum of cash at closing. Again, the amount of the reverse award available to the client is a function of how much equity there is in the home and the age of the youngest borrower. This option is available in adjustable rate formats only.

HECM Refinance and Receive a Monthly Payments: This option allows the client to refinance into a HECM and structure the reverse proceeds into a monthly payment amount. This option can be used in combination with the Line of Credit option, paying off an existing mortgage and a lump sum of cash at closing explained above. This option is beneficial to clients that may simply want a monthly amount of money and not be bothered with a lump sum of cash or a line of credit. Again, the amount of the reverse award available to the client in the form of monthly payments is a function of how much equity there is in the home and the age of the youngest borrower. This option is available in adjustable rate formats only.

While the typical retiree uses a HECM as a refinance vehicle to eliminate debts, pay for healthcare and/or cover daily living expenses, a growing segment of the senior population is using the HECM to purchase a home that better suits their needs. 

The advantage of using a HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds/award. This home buying process leaves you with no monthly mortgage payments for as long as the last home owner lives or lives in the home permanently. This option is available in fixed rate or adjustable rate formats. While study after study reveals that an overwhelming percentage of seniors want to continue living in their current home for as long as possible, for some people this just isn’t the best, or safest, option. HECM for Purchase offers a solution to downsize into a place that’s more easily navigable, possibly more energy efficient, with lower maintenance costs, or which is closer to friends and family.

Reverse Mortgage - Qualifications
A Home Equity Conversion Mortgage (HECM), or Reverse Mortgage, is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid back to you. Unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
What are the qualifications of a Reverse Mortgage?

  - Must be 62 years of age or older
  - Must live at the residence full time
  - Must take approved counseling course
  - Have sufficient equity in your home

 
 

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