Reverse Mortgage Facts

This is a Safe Government Program

The safety was assured in 1989 when the United States Congress authorized the Federal Housing Administration’s (FHA) Home Equity Conversion Mortgage (HECM), and since then the popularity of this government program has grown immensely. No deficiency judgment may result from your reverse mortgage. FHA insurance guarantees against any loss to the lender.

Because of some previous issues in the 1990s, a number of federal safeguards have been put into place, to that ensure seniors are protected. The interest rate and all of the fees are now government regulated. Another one of the safeguards is that an education session from a HUD Approved counselor is required in order to participate in the program. These safeguards help protect and educate you.

Any Money you receive from the program is considered Tax Free Income

Currently the Internal Revenue Service treats monies received from a reverse mortgage to be loan advances and not taxable income. For your specific situation, we recommend that you consult your tax advisor.

There is No Repayment of the Loan until you vacate the home

Repayment is due after all Homeowners permanently vacate the home, the last surviving borrower sells, moves out permanently or passes away. Any excess equity will go to you or your Heirs. Typically, the property is sold and the loan is repaid. Any remaining equity belongs to you or your Heirs. Your Heirs can also do a traditional refinance if they want to keep the home.

You Retain Full Ownership Rights

You still retain title, ownership and control of your home. A reverse mortgage is merely a loan against the property. The title remains in the name of the borrower and the lender is only repaid the loan balance or the home value which ever is less.

You can use the Money received for any purpose, there are no restrictions

You can use the money to payoff debts, deal with financial emergencies, travel, increase your monthly income, pay for home improvements, help your children or grandchildren, or establish a cash reserve for future needs. There are many possibilities.

OK with Social Security and Medicare

Reverse mortgage loan funds do not affect your Social Security or Medicare benefits. However "Need Based Programs" such as Medicaid, Aid to Families with Dependent Children (AFDC), and food stamps all have different eligibility requirements. The income benefits are limited, and you must structure your cash payment from a reverse mortgage to follow those guidelines. We recommend that you contact your local agency on aging, or these agencies' respective offices, for their particular guidelines.

Must be 62 years of age or older

All Homeowners must be at least 62 years of age. The older you are, the more benefits you qualify for.

No Income or Credit Requirements to Qualify

Unlike other traditional loan requirements, your income and credit is not considered when qualifying you for the HECM loan. The allowable equity that is available to you is calculated based on three factors, the youngest borrower's age, the appraised value of your home, and the FHA maximum loan limit for your county. A reverse mortgage has the ability to save seniors from foreclosure, provide money for seniors coming directly out from a discharged bankruptcy, enables seniors to pay off debt collectors, among many other situations.

You will need to attend an Education Session with a HUD Approved HECM Counselor

A HECM Reverse Mortgage education counseling session with a HUD-approved counseling agency is requirement to participate in the program. Family members are encouraged to attend these counseling sessions. The Counselor explains the different options and makes sure the consumer is eligible for a Reverse Mortgage. Upon completion you will receive a certificate. The Lender that processes your loan will need this original certificate.

Existing Mortgage Liens will need to be paid off at time of Reverse Mortgage Loan

An existing mortgage lien will need to be paid in full using Reverse Mortgage proceeds. This will increase the Homeowner's cash flow and make life a whole lot easier by removing the monthly mortgage payment!

Reverse Mortgage is considered a 'Non-Recourse' loan

The FHA Mortgage Insurance, that is required by these loan programs, enables protection where there is no personal liability to you or your Heirs. No matter what, in a worse case scenario, the lender can only look to the property for repayment. FHA would make up any shortage to the lender and NOT come after your Heirs for the difference. FHA insures the guaranty against any loss to both the lender and borrower. In a best case scenario there will be retained equity available for your Heirs.

You will be required to pay the annual taxes and hazard insurance.

As part of the loan agreement, you are responsible for payment of annual property taxes and homeowners hazard insurance. You need to be aware that if you ever fail to make payment on your annual taxes or hazard insurance it is a trigger to call the loan due.

You will be required to keep up on the maintenance of the property.

As part of the loan agreement, you are responsible for the home maintenance.

.........................................................................................