Question:  What is a HECM or Reverse Mortgage?

Answer:  

A HECM or Reverse Mortgage is a special type of mortgage that enables you, as an older homeowner, to tap the equity you have in your home while giving you the maximum amount of flexibility to address your particular financial needs. 

You may receive your money in a lump sum to pay an unexpected hospital bill or a stream of regular monthly payments to supplement your monthly income.

Unlike traditional home equity loans, no repayment of the HECM loan is required until you no longer occupy the home as your principal residence. 

At that time, the lender, with the permission of the HUD field office, will declare the mortgage due and payable.

With a HECM, you borrow against the value of your home and receive loan proceeds according to the payment plan that you select. 

As a borrower, you may change payment plans as many times as you wish.

When you sell your home or vacate it for other reasons, the accrued interest plus what the lender has paid you or on your behalf through the years is due and payable, usually from the proceeds from the sale of your home.

Any excess belongs to the estate.
 

Question:  Who is Eligible for a HECM? 

Answer:

You, and any co-borrowers, must be at least 62 years old and either own your home free and clear or have a mortgage that can be paid off with the proceeds of a Reverse Mortgage.  

You also must agree to accept mortgage counseling from a HUD approved counseling agency. This service is FREE of charge.

Family members are strongly encouraged to attend these counseling sessions.
 

Question:  What properties are eligible for the Home Equity Conversion Reverse Mortgage?

Answer: 

Single family home, condominium, apartment buildings that are 1-4 units.
 

Question: Must I pay off any loans or liens that are against the property? 

Answer: 

Yes, all loans or liens must be paid off to get the HECM loan, but they can be paid off with the proceeds from the Reverse Mortgage. 

Question:  What if my home needs repairs?

Answer:

Repairs to the property are usually determined by the FHA appraiser. Sometimes other professionals are required to inspect the property. For example, a water test is required if the source of water used by the property owner is a well. 

Depending on the type and cost, repairs may be completed before or after the closing. If repairs are needed we will work with you in every way possible to get your loan closed. 
 

Question:  What are the minimum and maximum amounts that I can borrow?

Answer:

The maximum amount you can borrow is based on a HUD formula that factors in the age of the youngest borrower, the expected interest rate and the maximum claim amount.

The maximum claim amount is the lesser of the appraised value of your house or the maximum loan amount for a single-family residence that can be insured by FHA in your area. There is no minimum borrowing amount.  There is no upward limit on the value of the property.
 

Question:  Must I be retired?

Answer:  No, there is no limit to income earned, but you must be 62 years of age. 
 

Question:  What is a HECM or Reverse Mortgage?

Answer:  

A HECM or Reverse Mortgage is a special type of mortgage that enables you, as an older homeowner, to tap the equity you have in your home while giving you the maximum amount of flexibility to address your particular financial needs. 

You may receive your money in a lump sum to pay an unexpected hospital bill or a stream of regular monthly payments to supplement your monthly income.

Unlike traditional home equity loans, no repayment of the HECM loan is required until you no longer occupy the home as your principal residence. 
 

At that time, the lender, with the permission of the HUD field office, will declare the mortgage due and payable.

With a HECM, you borrow against the value of your home and receive loan proceeds according to the payment plan that you select. 

As a borrower, you may change payment plans as many times as you wish.
 

When you sell your home or vacate it for other reasons, the accrued interest plus what the lender has paid you or on your behalf through the years is due and payable, usually from the proceeds from the sale of your home.

Any proceeds in excess of the amount owed the lender belong to you or your estate.
 

Question:  Who is Eligible for a HECM? 

Answer:

You, and any co-borrowers, must be at least 62 years old and either own your home free and clear or have a mortgage that can be paid off with the proceeds of a Reverse Mortgage.  

You also must agree to accept mortgage counseling from a HUD approved counseling agency. This service is FREE of charge.

Family members are strongly encouraged to attend these counseling sessions.
 

Question:  What properties are eligible for the Home Equity Conversion Reverse Mortgage?

Answer: 

Single family home, condominium, apartment buildings that are 1-4 units.
 

Question: Must I pay off any loans or liens that are against the property? 

Answer: 

Yes, all loans or liens must be paid off to get the HECM loan, but they can be paid off with the proceeds from the Reverse Mortgage. 
 

Question:  What if my home needs repairs?

Answer:

Repairs to the property are usually determined by the FHA appraiser. Sometimes other professionals are required to inspect the property. For example, a water test is required if the source of water used by the property owner is a well. 

Depending on the type and cost, repairs may be completed before or after the closing. If repairs are needed we will work with you in every way possible to get your loan closed. 

Question:  What are the minimum and maximum amounts that I can borrow?

Answer:

The maximum amount you can borrow is based on a HUD formula that factors in the age of the youngest borrower, the expected interest rate and the maximum claim amount.

The maximum claim amount is the lesser of the appraised value of your house or the maximum loan amount for a single-family residence that can be insured by FHA in your area. There is no minimum borrowing amount.  There is no upward limit on the value of the property.
 

Question:  Must I be retired?

Answer:  No, there is no limit to income earned, but you must be 62 years of age. 
 

Question:  Must I pay off all my debts, such as credit cards, car loan or medical bills with the disbursement
of the Reverse Mortgage loan proceeds?

Answer:

No, only loans or liens against the property must be paid off either prior to closing or with the initial disbursement.
 

Question:  What happens if joint borrower dies?

Answer:

The provisions of the Reverse Mortgage loan remain in effect.  The surviving borrower may continue to request funds from the program until the funds are exhausted.
 

Question: Is the money tax-free?

Answer:

Because the money you receive from a Reverse Mortgage
is a loan, all of the money is tax-free.
 

Question: Will the title remain in my name?

Answer:  Yes, the title will remain in your name.
 

Question:  Can I repay my loan?

Answer:

You may make partial or full repayment on your balance at any time and apply any amount. Full repayment will terminate the loan program.
 

Question:  What types of payment plans are available with the HECM loan?

Answer:

A borrower with a HECM loan may choose five payment options:  Term, Tenure, Modified Term, Modified Tenure and Line of Credit.

Under the TERM option, you may receive equal monthly payments for a fixed period of time selected by you.

Under the TENURE option, you may receive equal monthly payments for as long as you occupy the home as your principal residence.

Under the LINE OF CREDIT option, you may draw up to a maximum amount of cash at times and in amounts of your choosing, as long as you occupy the home as your principal residence.

The MODIFIED TERM option allows you to set aside a portion of loan proceeds as a line of credit and receive the rest in the form of equal monthly payments as long as you occupy your home as your principal residence.

If you select either of the term plans, you can remain in your home after the end of the loan term without restarting repayment.  The same is true if you have withdrawn the maximum amount under a line of credit or modified tenure payment plan.

Remember, repayment of a HECM loan does not begin until you no longer occupy your home as your principal residence. 
 

Question:  How will the amount of the monthly payment be calculated?

Answer: 

How much you can receive in monthly payments depends on the age of the youngest borrower, the interest rate, the maximum claim amount and the program you select.

The older you are, the larger the monthly tenure payment will be to you.  
 

Question:  Will HECM payments affect my social security, Medicare supplemental security income or Medicaid benefits?

Answer:

HECM payments do not affect your Social Security or Medicare benefits because those benefits are not based on assets of the recipient. 

However, in the Federal Supplemental Security Income Program, beneficiaries must keep their liquid resources under certain limits ($2,000 for individuals and $3,000 for couples). If you do not spend HECM advances in the month received, then such funds are considered part of your liquid resources and may adversely affect your eligibility for SSI.  Therefore, a HECM borrower who receives SSI should never draw more money than they actually need to spend that month.

Regulations for state administered programs such as Medicaid, AFDC, food stamps and for  state funded welfare programs (such as state supplements to SSI) all have different eligibility requirements.  Therefore, we suggest that you consult a benefits specialist at your local area agency on aging or the local offices for these programs to determine how HECM payment may affect your particular situation. 
 

Question:  Will I have to pay fees to obtain a HECM?

Answer:

Yes, you will have to pay an origination fee, other normal loan closing costs and a mortgage insurance premium, which is divided into two part parts:
an up-front premium of 2% of the maximum claim amount and ½ percent per year on your mortgage balance, and a monthly servicing fee.

You can finance all of the closing costs and the up-front
2 percent mortgage insurance premium.

These may be included in your loan balance so that you do not have to pay them in cash. The monthly servicing fee and the yearly insurance premium will be charged to your loan balance as the charges occur. 

You will need to pay $350 up front to start your loan. This is for the appraisal and the check cannot be collected until you have your counseling certificate.
 

Question:  Do I pay interest on all the money from a reverse mortgage loan from the day of closing?

Answer:

You only pay interest on the money as you actually borrow.
 

Question: Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home? 

Answer:

Absolutely not as long as you continue to occupy the property as your principal residence.

You cannot be forced to sell or vacate the property, even if the total mortgage payments to you plus interest and mortgage insurance premiums exceed the value of the property or if the fixed term over which you received your payment has expired.

No deficiency judgment may result from your HECM loan. FHA insurance cover any further financial obligation to the lender.
 

Question:  Who is responsible for paying property taxes and insurance?

Answer:

As the property owner you are responsible for paying property taxes, insurance and to maintain the property. The note may become due and payable if you do not pay these home ownership expenses.   
 

Question:  Will my heirs owe anything to the mortgage lender when I die?

Answer:

Upon your death, the loan balance, consisting of payments made to you or on your behalf plus interest, becomes due and payable. 

Your heirs may repay the loan by selling the property or by paying off the HECM loan so that they may keep the home.  If the loan exceeds the value of the property, your heirs will owe no more than the value of the property. FHA insurance will cover any balance due the lender. 

No additional financial claims may be made against your heirs or estate. 

You or your heirs will never owe more than your home is worth.
 

Question:  If my home appreciates in value during the mortgage term, who will be entitled to the money?

Answer:

Under a HECM loan you are legally required to pay back to the lender only the outstanding balance.  Any money remaining after the mortgage is paid off goes to you or your heirs upon your death. 
 

Question:  What if I decided to sell my home?

Answer:

If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender.  You and your estate will receive any proceeds exceeding the loan balance.
 

Question: Can I sell my home to my children and continue to live in it?

Answer: 

If you sell your home to your children or any other individual, the HECM loan will be due and payable at settlement. 
After the loan is repaid, any arrangement for your continued occupancy of the property must be made with the new owners.
 

Question:  Is this a fixed rate loan?

Answer:

The market is changing and some lenders are beginning to offer fixed rate mortgages.  The oldest and proven reverse mortgages are adjustable rate mortgages. The rate is the same for every lender because it is determined by the one year Treasury bill plus a margin. The annual adjustable rate mortgage plan features a 5 percent cap. The monthly adjustable rate plan features a 10 percent cap.
 

All loan documents should be understood before signing.
 

Question: How safe is a reverse mortgage?

Answer:

Reverse Mortgages are insured by the Federal Housing Authority and private financing institutions. You are not obligated to make monthly payments and you cannot out live your loan. This makes the Reverse Mortgage the safest mortgage you can obtain. 
 

Question: Can I purchase another principal residence with a Reverse Mortgage?

Answer: 

Yes. Many times we’ve been able to help people buy a home they thought they would never be able to afford.
 

Other times we’ve helped people “buy down” and provide additional monthly income for them.  
 

Questions? Call or email.
Joyce Bea Sterling
859-525-1114
jsterling@fuse.net