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General Information / How Does a Reverse Mortgage Work

Hi! I'm ARLO™, ask me anything about how reverse mortgages work and I'll fetch your answer immedietly!
 

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Question From Marty on 8/16/2018

What happens if value of my home becomes lower than amount of my current reverse mortgage balance?

Expert Answer

Hello Marty,

If the value of the home drops or you borrow all of the funds available and stay in the home long enough, the balance could exceed the value of the home.  However, that is one of the safeguards of the program.  No matter what happens to the value and whether or not the loan balance exceeds the property value at any time, you can continue to live in the home without having to make a payment for as long as you meet the agreements in the loan documents (you live in the home as your primary residence, you pay the taxes and insurance in a timely manner and you maintain the home in a reasonable fashion).

If you live up to the agreements you made when the loan was closed, you can continue to stay in the home at the agreed upon terms (that means if your are getting a monthly payment you will continue to receive it and if you got a line of credit and did not use all the money), those funds will always be there for you. 

The second great thing about the reverse mortgage in this instance is the non-recourse nature of the loan.  This means they can look to no other assets to settle the debt if the property will not sell for enough money to cover the balance of the loan.  As in your question, if the value ever goes down and the balance of the loan is higher than the value of the property, when you pass, your heirs have the option of walking away without having to pay any of the shortfall, or they can keep the home by paying the lesser of the amount owed or 95% of the current appraised value.

In other words, your question assumes the home is not worth what is owed so your heirs could retire the debt and keep the home by paying just 95% of what the home is actually worth instead of the higher outstanding balance if they wanted to keep the property.  Or they could walk away from the house and owe nothing.  And regardless of which option they choose, the lender will never look to other estate assets for repayment.  Their only recourse is the property itself.

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Question From April R. on 7/19/2018

I don't understand why my brother took out a $300,000 reverse mortgage on my mother's house which is only valued at $200,000 and then two years later for some reason she had to buy it back for $24,000 does any of that make sense to you

Expert Answer

Hello April,

The way you are explaining it makes no sense but I think I know what you mean.  The reverse mortgage is a loan where the amount available to the borrower can grow over time which gives borrowers access to much more money later in the loan if they do not access their funds early on. Also, if borrowers do borrow all funds immediately, the balance owed grows as interest accrues and no payments are made by the borrower thereby increasing the loan balance over time above the starting loan amount. 

Therefore, the face amount of the documents must be greater than the amount the borrowers initially receive and HU requires that the documents are recorded at 1.5% of the property value to cover for the potential increase in the balance and amount available, even though the borrower may not borrow that much and may never owe that much.

Very similar to a Home Equity Line of Credit that is recorded for $100,000 from which you may never take more than $5,000 – it’s still recorded at the higher amount in case you do borrower more later.  In your example, the home was worth $200,000 so the Note and Deed face amount were for $300,000 to cover any growth in the amount of the loan available to mom over the years, but she only ever owes what she actually borrows plus any interest that accrues on that amount. 

That takes us to the next part of your question.  Mom didn’t have to “buy it back”.  She always owned the home, she did not need to buy anything back.  It sounds though like she had a balance owed on the loan after 2 years of $24,000. If she or the heirs want to pay off the loan at that point or mom moves out of the home or passes and the loan becomes due and payable, only the part mom owes must be repaid.

In this instance, that sounds like it would be the $24,000 outstanding balance – not the entire loan for which she was qualified but never borrowed and certainly not the face amount of the Note and Deed that she did not receive ($300,000). She or the heirs are not “buying it back”, they are merely paying off a loan that has come due at that time and the balance of the loan due is $24,000.

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Question From Doug on 7/12/2018

What happens to any equity in a property if there is a reverse mortgage foreclosure? Example, last owner passes with a reverse mortgage balance of $150K but the propert is valued at $800K and goes to foreclosure? Who keeps the equity if the propery goes to auction?

Expert Answer

Hi Doug,

A reverse mortgage is just like any other loan in this regard.  If the lender has to foreclose on the loan, it can only do so through the foreclosure laws as established in the state.  In the case of a foreclosure on a Deed of Trust, the lender works through the Trustee (a third party designated in the Deed of Trust and usually a title company) who will sell the home at auction.  The initial bid at the auction is the amount owed to the lender plus any costs accrued to date.  This is the only amount the lender may bid.  In your example, even though the house is worth significantly more than the amount owed, the lender may only bid the $150,000 that is owed to them and may not make any further bids against other bidders even though it would still be profitable to do so to try to make money for the bank.  If no one bids against the lender at auction, the property becomes the lender’s for the amount owed.  If others bid (as is usually the case when there is significant equity as in your example), the lender is out of the bidding process after the first bid is received that exceeds the lender’s opening bid.

The trustee will pay off the lender with the proceeds of the sale and the remaining money is then the property of the former owner of the property.  In the case you cited, if the former owner has passed, the money would go to the estate of the former owner usually through a court action.  If the owner died with no heirs and no will directing that their estate be paid out in any certain manner, I cannot tell you for sure where the money would go in all instances but I can only assume it would escheat to the state under those circumstances.

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Question From Don M. on 7/11/2018

How long must a 70 year old man live in home before qualified?

Expert Answer

Hi Don,

The answer is the same for any borrower aged 62 and over who is eligible for a reverse mortgage.  If the transaction is a purchase, you must occupy the home as your primary residence within 30 days after closing the loan.  If it is a refinance transaction, you must be in the home and can demonstrate that the home is your primary residence, there is no set time frame.  In other words, if you buy a home, then move in, you can apply immediately.  If you have other property that you have owned for a long time that you intend to keep that has been your primary residence or you have owned a home that has previously not been your primary residence and now you want to claim it as your primary residence and do the reverse mortgage, the lender will want to see that you have truly made this home your primary residence by taking the steps that would indicate to the lender that you have made this home a primary residence.  They will request documentation to show that it is no longer a second home or other property and may review some timeframes based on past living patterns such as living in warmer climates only during the winter, etc.  The lender will utilize a common sense approach to determine whether or not primary residency has been established with all the information they receive.

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Question From Patty on 7/11/2018

My brother is on the mortgage note. I am only in title. We want to do a reverse mortgage. Can I be on the reverse mortgage with him? I am 68 and he's 69 and it's our primary residence. Or, do we have to refinance our loan with both our names and then do a reverse mortgage.

Expert Answer

Hello Patty,

If you are both on title and both occupy the home as your primary residence, you can both be on the reverse mortgage loan.  There is no requirement that you both be on the previous loan in order to get a reverse mortgage now with both your names on the new loan.

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Question From Alice on 7/11/2018

Does a name on a reverse mortgage document over ride a different persons name on a deed?

Expert Answer

Hello Alice,

A Deed conveys title and a Mortgage is a lien on title.  They are two different instruments that perform two different functions and so neither of them “over-ride” the other.  The lender should only grant a loan to the individuals on title at the time or have some agreement in place from someone else on title who would not be on the loan (such as a non-borrowing spouse) that they allow the lien to be placed on the home.  The lender would not grant a loan to someone who does not own the home though and that is the whole reason for title searches and title insurance as part of the lending process.

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Question From Mike on 7/08/2018

How long does it take to get a payout from the reverse mortgage company after it is requested?

Expert Answer

Hello Mike,

The timeframe for receipt of fund requests depends on the way you set the account up with the company in the beginning.  The servicer will have a payment out to you within 5 days of receipt of a bona fide request (providing there are no defaults on the loan at the time and there is still money available).  The payment will either be a check or a direct deposit into your account, depending on how you set it up at the close of the loan.  If you requested checks, then you have to wait for the company to draw the checks through their accounting department and the mail times as well.  If you requested an auto-deposit into your account, it’s just like a wire and usually hits your account the same day the transfer is done by the servicer.  Most borrowers report that they receive their deposits within 48 – 72 hours of request with the direct deposit.

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Question From Mfeigeles on 7/06/2018

What if someone took a reverse mortgage and only a non borrowing resident was living in home?

Expert Answer

Good Afternoon,

If the lender discovered that the borrower did not or no longer occupied the property as their primary residence for any reason (i.e. the borrower passed, the couple split up or the borrower was forced to permanently move to an assisted care facility), the loan would become due and payable.  As soon as the lender became aware of the situation, the lender would call the Note leaving the borrower or the resident with a short amount of time to pay the loan off.  If the individual in the home was unable to pay the loan at that time, the lender would have to begin foreclosure proceedings due to the breach in the loan terms. 

For this reason, we strongly suggest all borrowers become familiar with the obligations of the reverse mortgage.  If you cannot or do not intend to abide by them, this is not the right loan for you.  If your circumstances change, you are much better off to take positive steps to refinance the loan or sell the home before the lender is forced to begin a foreclosure action which will cost you more money and can severely limit your options once a foreclosure has begun.

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Question From Angela on 7/05/2018

When getting a reverse mortage can two separate checks be issue each married parties?

Expert Answer

Hello Angela,

If both borrowers are on the loan (for example, both are over 62 and are borrowers listed in the documents), then the initial disbursement will either be wired to an account which both borrowers are on or will be in the form of a check made payable to both borrowers – the lender and the title company will not issue separate checks to each spouse.  Once received, the spouses can do as they wish with the money.  If however one borrower is not on the loan as would be the case with a non-borrowing spouse, then the check would be made payable only to the borrowing spouse on the loan.

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Question From Stephen on 6/26/2018

How does one gain access to a reverse mortgage which requires both husband and wife's signatures if one of us dies. Is a death certificate enough or is more involved?

Expert Answer

Hello Steven,

The death certificate should be all the servicer requires.

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Question From Frances R. on 6/25/2018

How does it work?

Expert Answer

Hello Frances,

Please feel free to take a look at the article we released here https://reverse.mortgage/how-does-it-work and give us call if you have any questions at all.  Or if you would like to see how much money you could expect to receive, please feel free to visit me on our website at https://reverse.mortgage/calculator and I will be happy to show you a no hassle, no obligation proposal detailing real time costs and available programs.

Do you have a question? click here for an answer
Question From D Payne on 6/23/2018

My dad wants to sign up for a reverse mortgage that will pay part of the equity in his home now and part later if he needs it. My question is this, if he passses and doesn't use the rest of the equity what happens to it?

Expert Answer

The house and the equity always belong to him.  If he passes, the loan becomes due and payable but he only owes what he actually borrowed, any costs he put into the loan to start and any interest that accrued on it.  The heirs can choose to pay the loan off and keep the house, sell the house or whatever they choose to do but they just need to know that the loan will be due at that time so they will need to make a decision.

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Question From Syd on 6/23/2018

I have been approved for a reversed mortgage and my disbursement didn't come on its scheduled date. Is there anything I can do?

Expert Answer

Hi Syd,

Are you telling me that you closed the loan and have a monthly payment that you didn’t receive or that you received loan approval but that they have not closed the loan yet and so you do not have your money from the loan at all?  You do have remedy if there is a monthly payment that is not paid on time but if the loan is not yet closed, it would really depend on what the reason was for the delay.  The lender may be waiting on documentation from you, the title company or the appraiser so I would be very hesitant to comment on a loan that has not yet closed as to what may be causing a delay.

If the loan was closed and you still didn’t get your funds, that would be extremely odd and you should check with the title company and your lender to determine why you have not received your disbursement.  If you requested a wire, it should have been in your account the same day and if you requested a check, it would take a little longer but again, I don’t know what status you’re in (approved, recently closed or waiting on subsequent monthly payments) so I would suggest the first thing would be to contact your lender and just ask them what is happening and go from there. 

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Question From Victoria on 6/18/2018

I had a 2nd mortgage and the 2nd mortgage was not included when the loan was sold to another company. There is a lien for the 2nd mortgage of $25,000. Am I able to do a reverse mortgage if there is a lien on the 2nd mortgage?

Expert Answer

Hi Victoria,

HUD has some rules for the payoff of a second lien.  If the loan was taken out less than 12 months ago and you received cash out of the loan, in other words, you took cash out of your home for any reason (to pay off debt, to put money in your pocket, to buy a car, anything), then the reverse mortgage cannot pay off this loan until it has the required 12 months’ seasoning.  If the loan was not used to take cash out of the home (it was part of the purchase of the house, it paid off a previous 2nd that was 5 years old and was not itself a cash out second with less than 12 months’ seasoning), then there is no problem paying the second off with the reverse mortgage. 

The loan does have to be paid in full with the reverse mortgage, it would not be allowed to remain on the property and still get the reverse mortgage so knowing when it originated and whether or not it was a cash out transaction is important.  I would encourage you to try our online calculator here and we can go over the eligibility and even give you a no obligation, no hassle proposal that would show you what you might expect the loan to do for you based on that second and first payoff.

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Question From Clint on 6/14/2018

Can my brother be on my reverse mortgage as the second person at 62?

Expert Answer

Good Afternoon,

Let me make sure I answer this clearly because by the way the question is asked, it sounds like you already have the loan.  Your brother cannot be added to an existing loan that he was not on at the time the loan was closed, no one can be added to an existing, closed loan.  If you want to add someone to title and do a loan in both your names, you would have to refinance the existing reverse mortgage with a new loan that takes both of your ages, income and credit into account and determines eligibility based on today’s parameters.

However, if you are referring to a new loan that you intend to close at some point in the future, yes, your brother can also be a borrower on the loan as long as you add him to your title, he lives in the home as his primary residence and he is also at least 62 years of age.  If he meets all of this criteria, he would also be able to stay in the home for life without having to make a mortgage payment, even if something happened to you or you were forced to move to assisted living, etc.  Others who are also on title who do not meet all the other requirements are considered “non-eligible” coborrowers and while you would still be able to do the loan, the loan would be called due and payable once you no longer lived in the home (if you passed or moved to another location).

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Question From Carol on 6/12/2018

How do I leave my reversed mortgaged house to my granddaughter?

Expert Answer

Hi Carol,

The reverse mortgage is a loan just like any other loan.  You would leave her the property the same way you would if you had a regular, forward mortgage on the property.  The loan will become due and payable once you are no longer living in the home so she will have to seek financing in her own name at that time, but the act of leaving her the home does not change. 

I would suggest that you contact an attorney and if this is your desire, you can find out about the process and what is the best, most cost-effective and quickest method.  It may be putting the property in a family trust with your granddaughter as the successor trustee, the attorney might have you add her to title now so that when you pass, she is already on title.  Your attorney will have to give you the best legal method for handling the transfer so that it occurs the quickest and with the least amount of tax consequences but it is better to have your plan in place now, rather than to have her wait and try to do it after you have passed and others may not be as sure about your wishes.

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Question From Kayla H. on 6/11/2018

What happens once the reverse mortgage payments to the home owner are completed? No more reverse mortgage loan payments are being received by the home owner because the entire loan amount has been paid. Is the title transferred to the lender? Is the home owner required to start making payments from the loan back to the reverse mortgage lender? Do they just live in the house until they die and then the lender gets their money back when the house sells? Thanks for your help!

Expert Answer

Hi Kayla,
 

The payments depend on the program you choose. If you choose the tenure option, the payments continue for as long as you live in your home. If you choose a term option, the payment can run out at some point after all funds are used. If the payment were to cease, you can still live in the home payment-free for as long as you occupy it as your primary residence.  And the lender is repaid after you leave the home and the property is sold or an heir decides to keep the home and repays the obligation, usually in that case with a refinance in their name with a new loan.

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Question From Margie on 6/11/2018

I own a home in Pine, Colorado. I purchased the home in January, 2018. I'd like to obtain a reverse mortgage and pay off my mortgage that is at a very, very high rate of interest. I paid $510,000.00 for the home. The appraisal came in at $566,000.00. I'd like to know how much I can borrow using a reverse mortgage. Please let me know as soon as possible as I have complete the process to obtain the reverse mortgage however, the mortgage company is requiring a very large additional amount of cash at closing because they said I need to own the home for longer than one year in order to benefit from the appraisal. Can you verify that information they have given me?

Expert Answer

Hi Margie,

There is not a hard a firm rule about having to wait a year to be able to use the current appraised value. HUD allows lenders to use reasonable values so I would encourage you to start with by running our calculator here. I can't promise that we can use any particular value but we can sure look at recent sales and let you know what we see!

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Question From Colleen T. on 6/07/2018

We have a reverse mortgage and my husband is in bad shape and i am going to have to quit my job to take care of him. We have a small vacation home and our reverse mortgage house is huge and it is getting very hard to take care of it. It is a old house but we have taken care of it. If we move out can we just give them the deed and not have to pay anything else?

Expert Answer

Hi Colleen,

I would certainly suggest you compare your monthly statement to what a real estate professional tells you they can sell the home for first.  You may find that there is remaining equity that you can keep and that would keep you in good standing with HUD in the off-chance you ever need another government loan again in the future.  If there is absolutely nothing you can do, the loan is non-recourse and you can leave without having to pay any additional money but it’s not the most advantageous decision when you are not forced to leave the home due to death, illness, etc.

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Question From Rose Mary S. on 5/21/2018

I am over 62 and currently owe approx. $37,000 on my home that recently appraised for 80,000. I need some extra monthly income long term and have some unexpected expenses that have come up. Can I roll that $37K into a reverse mortgage and benefit from the remaining equity? Thanks

Expert Answer

Hi Rose Mary,

Only you can determine if the benefit of the reverse mortgage will be enough for you to do what you want after you pay off your existing loan(s), but I can help make that decision easier for you by giving you all the information you need to make an informed decision with no stress and no pressure.  Come visit me at my interactive online calculator. I can give you real time results on what you can expect from the loan for your age and property value and the real costs in your area.  There is never a cost or any obligation to see what might be available to you and no endless calls from someone trying to sell you something you don’t want if you determine that the loan does not meet your needs.  Come visit me and I think you will be glad you did.

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Question From Ck on 5/01/2018

Mom is 78 I’m 51 we are shared joint tenants on the til. Mom wants a reverse mortgage Do I need to get my name off the title? In order for her to properly qualify?

Expert Answer

Hello Carla,

You do not have to remove your name from the title in order for mom to get a reverse mortgage.  Prior to HUD issuing their Final Rule last year, this would have been the case and you would have had to come off title but now you can remain on title.  There are several documents you will still have to sign even though you are not a borrower on the loan acknowledging the terms of the mortgage and allowing the loan to be placed on the property.

You also need to remember that once mom no longer lives in the home as her primary residence, the loan will become due and payable.  In other words, you need to have a plan in place for what you will do when mom either has to move or passes so that you are ready to extinguish the reverse mortgage at that time which would include 1) paying off the loan with money available to you, 2) you refinancing the loan into a new loan that would pay off the reverse mortgage, or 3) selling the property at that time.

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Question From Susan B. on 4/27/2018

I am 67, sole owner of home rebuilt after fire. Current appraisal is $320K. I received a HELOC for $39K in Sept. 2015, increased to $69K in May 2017. Final draw from HELOC 4-23-2018, balance $68K. Under seasoning requirements, which date begins the 12 month period? I qualify under income guidelines and see no further rules or regulations which might prevent me from applying now. Thank you for any information.

Expert Answer

Hi Susan,

Great question!  This whole issue changed with HUD’s Final Rule that they issued just last year.  Just to answer your question though, the seasoning is a moot point after the loan is over 12 months old so you can pay off the loan with your new reverse mortgage now.  Under the final rule, HUD now allows loans with no seasoning to be paid off if the payoff will be at or less than the 60% that HUD allows borrower’s to take as straight cash out on any transaction.  In other words, in your example, if the payoff of $68,000 represented 60% or less than the amount available to you under the reverse mortgage Principal Limit, which depending on your age and the interest rate it sounds like it would on a value of $320,000, then there is no seasoning required anyway.  If it represents 60% or less of the Principal Limit, you could have taken the loan out yesterday and it still would have been ok with no seasoning.  You are out of the woods already either way!

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Question From Steve on 4/25/2018

Me and my wife did a reverse mortgage about 10 years ago I wasn't old enough so they had to take my name off the title she's going to sell the house now do I have any rights or do I have anything coming from the sale of the house?

Expert Answer

Hi Steve,

You really need to discuss this with an attorney.  This is a legal question that has nothing to do with the reverse mortgage and everything to do with property rights of spouses in the state in which you live.  I’m sorry, I can’t advise you on such matters.

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Question From Morton G. on 4/24/2018

What are the "remain-in-my-home options" when my reverse mortgage falls due in October 2019?

Expert Answer

Hi Morton,

I’m sorry but I really am a bit baffled.  Why would your reverse mortgage “fall due” on October 19, 2019?  As long as you remain living in the home and keep your taxes and insurance payments current, there would not be an end date on the loan at that time.  There might be a date on which payments end if you chose a payment option on which you would exhaust the availability of funds, but that does not mean you have to move out.  In that event you just would not receive any more payments but could still live in the home.  Do you have more information you can supply?

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Question From Bob W. on 4/24/2018

Will the remaining money be used to pay the amount now owed on the property at the death of both?

Expert Answer

Hi Bob,

Any money that has not been drawn is money “unborrowed” and therefore not owed.  For example, suppose you have a line of credit for $100,000 but you only used $80,000 of it.  The $20,000 that you never used is not owed and therefore is not part of the balance.  If you were going to try to use the remaining $20,000 to pay down the line, you would have to first borrow it which raises your balance and so that would get you right back to the same point.  Instead of the $80,000, you would borrow another $20,000 and so you would now owe $100,000 and when you used the $20,000 to pay back the loan, you would be at the same balance of $80,000 that you had before you borrowed more money just to pay it off.

When the property is sold or the heirs decide they want to pay off the loan and stay in the house, they only have to pay off what you owed – not the entire line amount if the amount owed is less.  So in this example, if the house is worth $200,000, instead of having to pay off $100,000, they only have the balance of $80,000 they have to repay and so even though there is no cash available to them, there is a benefit to the heirs of a lower balance owing at the time.

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Question From Delores P. on 4/23/2018

I'm 82 and have a reverse mortgage on a cottage where i have lived the pass 4 years alone in the woods with no neighbors, I have been crippled with spine problems I cannot handle the up keep on this cottage. Can I do a maturity event and turn this cottage back to the revers mortgage company what will I be liable for?

Expert Answer

Hello Delores,

Unless there has been a huge depreciation on the home, there is probably still equity left and has not all been used in just 4 years.  I would suggest that you contact a real estate professional and find out what the home would most likely sell for before you consider just turning it in.  If there is still equity in the property, you should consider selling the home and keeping your equity when you move.

If you do have to move without selling the home, the reverse mortgage is a non-recourse loan.  In other words, the lender can look to no other assets for repayment of the loan.  I still believe that after just 4 years though, you should check to see if you could get money with a sale rather than what you might be liable for.

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Question From Ellen, Realtor on 4/20/2018

I have a friend, 70, who owes over $200K in Parent Plus loans and has only made interest payments o e many years. Because he is now on social security, they are lowering his payment to under $300 for p and I. He has more than enough for a large downpayment on a home and high credit score and wants to buy with a reverse mortgage. Will he be approved?

Expert Answer

Hi Ellen,

Unfortunately, I can’t really give you a yes or no answer to this question.  HUD does require borrowers to pass financial assessment guidelines which includes income qualification with consideration of the debts he has to pay each month.  With the information here, I can’t tell you if your friend would qualify or not.  He would have to have a minimum amount of money as required by HUD for his family size remaining each month after the payment of all debts is considered and that would include all costs of the home and any other debts he had including the Parent Plus loan monthly payment.  If you have him spend just a couple minutes on my calculator at https://reverse.mortgage/calculator, I would be happy to show him what he can get and allow him to put in his information and show him whether or not his income and liabilities would allow him to qualify without the hassle or any costs.

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Question From Robert on 4/11/2018

If all of Net Principal Limit is with drawn is that amount added to the current loan balance ?

Expert Answer

Hi Robert,

Yes, any amounts you draw from the line of credit, whether it be a portion of the line or all of the available Principal Limit is added to the current loan balance at the time the funds are drawn by you. 

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Question From Ali on 4/08/2018

On a shared deed can one ask for reverse mortgage on his share without other persons agreement

Expert Answer

Hello Ali,

All owners of a property must agree to the mortgage and must meet the eligibility requirements.

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Question From James S. on 4/06/2018

Will a reverse mortgage work on an interest free owner finance loan of under $50,000?

Expert Answer

Hi James,

All liens (loans) must be paid in full to be able to get a reverse mortgage.  If you wanted to pay the loan off, that would work (there may be additional requirements for the loan based on HUD’s normal guidelines).  But you would not be able to leave the loan on the home and get the reverse mortgage in addition to the existing loan.  You have to decide if you want to proceed knowing you will lose the interest free loan.  If you want to see how this would work out for you, I can fetch you all the program options at my Loan Optimizer so you can make an informed decision here.

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Question From Patty on 4/06/2018

Can I get a reverse mortgage on a property that is now in my name but money owed to previous mortgage was in my mothers name? There is equity I am 62 and disabled I live in the house.

Expert Answer

Hello Patty,

Many borrowers with whom we deal are placing a reverse mortgage on properties that they inherited and the loans being paid off are in their parents’ name.  As long as you own the home, live there as your primary residence, you meet the financial assessment requirements for income and credit, and the house meets HUD requirements, then you absolutely can get a reverse mortgage regardless of whose name is on the current loan.  That loan would need to be paid in full at closing and remaining funds on the reverse mortgage over and above those needed to pay off the existing loan (if any), would be yours to use as you wish.  Follow me to my Loan Optimizer here so see how much you could expect to receive from the transaction…

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Question From JOHN B. on 4/04/2018

If a house has been paid off can it qualify for a reverse mortgage?

Expert Answer

Hi John,

You can get a reverse mortgage on homes on which the existing mortgages have been paid in full or if there is still a balance owed.  If the house if paid off, then all funds available under the reverse mortgage (minus any costs) are yours to use as you wish.  If you still owe any money on a loan, that loan would have to be paid with the proceeds first and then any remaining funds would be yours to use as you wish.  Borrowers with paid off houses do qualify for and receive reverse mortgages regularly.

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Question From Teresa B. on 3/28/2018

I’d like the reverse mortgage for a safety net when I’m in my 80’s 90’s. I don’t want a debt to compound. I’d like to keep the minimum balance constantly to keep the line of credit available. What is the minimum amount to keep open? $50?

Expert Answer

Hi Teresa,

You do not have to take any draw on the line of credit when you open the loan so the minimum on the line would just be whatever your costs were at the time.  You could also make a payment at any time to later further reduce this amount if you so choose.  Just remember, the reverse mortgage is not a credit card that you can keep a 0 balance on and still keep the line open.  If you ever pay the line off in full, then the loan would be closed.  I usually caution folks to keep a minimum balance of $200 - $500 on the line just to keep from accidentally overpaying the balance and closing the loan but that is entirely up to you.

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Question From Michelle on 3/24/2018

Do you have to have at least 50 percent in equity to get a reverse mortgage? Or can it be less? Thanks for any info.

Expert Answer

Hi Michelle,

The amount of equity required depends on your age, the interest rates and the HUD lending limit.  The older you are, the more you receive on a reverse mortgage up to the HUD lending limit of $679,650 and then you receive no greater loan amount, regardless of the value of the home.  The best way to determine how much you would receive at any given time would be to visit our All Reverse Loan Optimizer (ARLO) and let ARLO tell you what you can expect.  It’s free, there is no obligation.  There is no real personal information required (we do need the month and year of birth of the youngest borrower to run the calculation but that’s all).  You can visit ARLO by clicking here.

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Question From Angela on 3/17/2018

How long does a reverse mortgage last? Example a home equity loan is for 10 years or longer. Does a reverse mortgage work the same way?

Expert Answer

Hi Angela,

The reverse mortgage has no “end date”.  You can maintain the loan as long as you live in the home and continue to pay your taxes and insurance.  Unlike a HELOC, there is no reset period and no opportunity for the lender to change their mind about being in the business and closing out your line.  As long as you have money left on the line of credit, it will continue to grow and will be available to you, providing you live in the home as your primary residence and you continue to meet the terms (you pay the taxes and insurance and maintain the home in a reasonable manner).  There are some other special provisions for things that could impair the lender’s security such as if you declare bankruptcy while you have a reverse mortgage, but even that does not close your loan, but could interrupt your access to the line of credit for some time.  The best part though is the fact that you don’t have to worry about your payment doubling or tripling in 10 years when it hits a reset and then facing foreclosure when the payments are too high because you never have to make a mortgage payment for as long as you live in your home (you are responsible to make payments of taxes, insurance and any other home assessments such as HOA dues).

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Question From Jorge on 3/16/2018

My parents are in a reverse mortgage. What do I have to do to get them out of the reverse mortgage?

Expert Answer

Hi Jorge,

The reverse mortgage is a loan just like any other loan.  Your parents can pay it off at any time with no prepayment penalty.  That means if you were just looking to put another loan on the property without the rising balance, you can easily just determine what the monthly payment amount would be with an amortization calculator and make those payments and save yourself the cost of the refinance.  If you have the funds available and didn’t plan to use other borrowed funds, they can just pay off the loan at any time without penalty.  The choice is entirely theirs.

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Question From C. on 3/15/2018

What if you are tenants in common with right of survivorship (in a single family home in Palm Beach County, Florida), with an adult child? Can you get a reverse mortgage on just your half of the house, without getting the child's consent? The house has a HELOC loan.

Expert Answer

Hello,

No, you would not be able to get the reverse mortgage on just a portion of a property.  In order to obtain a reverse mortgage loan, the lender must have all owners of the property agree to the transaction or they would not be able to enforce the terms of the loan.  And all owners would have to be at least 62 years of age to be eligible under the HUD rules for the program. 

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Question From Jose D. on 3/15/2018

I am 48 and my wife is 42 do we qualify for reverse mortgage

Expert Answer

Hello Jose,

Unfortunately, you would not qualify for the reverse mortgage program at 48 and 42 years of age.  The minimum age for borrowers of the reverse mortgage is 62.

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Question From Karen M. on 3/11/2018

Hello my name is Karen, I own my single family house the market price now is $1,200.000, the house is paid off, but I still have a personal loan $90,000 in repayment, each months I pay $500 , I would like to do the reverse mortgage when is 62 age, can i get easy to approve, my income right now I take a SSDI social security Disability is $1350, Please help me with this issue. thanks

Expert Answer

Hi Karen,

I honestly cannot determine your qualification from the information provided but I can give you a tool to use so that you have an idea of where you stand at any given time.  We have developed an online calculator that will tell you what you would expect to receive and it allows you to input things like assets, income and will automatically calculate real time costs in your area.  The All Reverse Loan Optimizer (ARLO) will allow you to run scenarios and see what works for you.  Also you said “when you turn 62”.  Once of the factors that determines your benefits with a reverse mortgage is current interest rates.  If you are still more than just a month or two away from your 62nd birthday, this could make a big difference in a rising rate market.  You may want to check back several times, especially as you get closer to your 62nd birthday if that is not really close.  You can check out ARLO by clicking on this link: https://reverse.mortgage/arlo

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Question From Barbara L. on 2/26/2018

Can you qualify for a Reverse Mortgage if the house is Mortgage Free?

Expert Answer

Hi Barbara,

You do not need to have a current loan on your property.  Your benefit is determined by your age(s), and the property value or the HUD lending limit (whichever is less).  Any loan(s) you have on the property must be paid first but if there are none, then you have full access to all the available funds.

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Question From Morris K. on 2/15/2018

What happens if my reverse mortgage loan balance grows larger than the value of my home?

Expert Answer

Hi Morris,

That is one of the safeguards of the loan.  You can always continue to live in the home with no mortgage payments.  Even if the balance is higher than the value, if you have additional funds available to you on your line of credit you will still have access to your line and the loan is non-recourse which means that when you pass, your heirs will never have to pay more than the property is worth if they want to keep the home (actually, 95% of the current market value or the balance on the loan, whichever is less) or they can walk away with no issues and the lender will take the property and can look to no other assets for repayment of the loan.

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Question From Lynn on 2/12/2018

My brother in law owes us $20,000. He took out a reverse mortgage on his home. Can he borrow against it to repay us?

Expert Answer

Hi Lynn,

Your Bother in Law has to use the funds first to retire any debts he had on the home and any money left over can be used for any purpose he wishes.  The HUD rules may restrict when he can access the funds and how much he can receive though so I could not begin to comment on whether or not sufficient funds are available in this case to pay any certain amount.

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Question From M Cusack on 2/08/2018

If I pay off my current mortgage balance with proceeds from the "reverse mortgage" loan. How does this work?

Expert Answer

Good Afternoon,

It would work just the same as any other refinance transaction.  You would close on the reverse mortgage loan and the lender would wire the loan proceeds to the title company who would pay off any liens of record so that they could insure the title  of no prior liens and then your loan or record would be the reverse mortgage.  The difference being that the reverse mortgage requires no monthly payments for as long as you live in the home (but you do have to continue to pay your taxes, insurance and any other property charges like homeowners association dues). 

If your eligible reverse Principal Limit (the loan amount for which you qualify) is higher than the amount you owe, you may choose to take cash out with the payoff of your existing loan, you may choose to leave the funds in a line of credit you can access when you wish or have a monthly payment made to you.  There are many options for receipt of your funds.  As I mentioned, you don’t have to make a monthly payment on the reverse mortgage but while you don’t “have” to, you can still choose to at any time and in any amount.  There is no prepayment penalty so many borrowers choose to make payments monthly, quarterly or annually to keep the balance on their loan from growing (the payments of interest that you do not have to make monthly are added to the balance to be paid in full when you reach a maturity event).  The maturity events are things like the passing of the last reverse mortgage borrower, the last borrower is no longer living in the home, or the property is sold.  Another thing you must keep in mind, like any loan secured by real property, the loan requires borrowers to maintain adequate insurance and to pay the real estate taxes as failure to do so would hurt the security for the loan and the lender could call the loan due and payable if the borrowers fail to pay these expenses.

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Question From Johnson on 2/08/2018

I have a second on my home can I get a reverse mortgage?

Expert Answer

Hello,

The second would also have to be paid in full at closing. Also, if the second was a cash out loan and that means you received any money at the closing of the loan (including cash to pay debts other than an existing mortgage) then you cannot use the reverse mortgage proceeds to pay off the second, you would have to use your own cash to pay off that loan.  

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Question From Jan on 1/25/2018

I have 2 questions: 1. If you have a reverse mortgage does that affect how you answer the question "do you own your home?" 2. Is it true that most reverse mortgage lenders sell your reverse mortgage to a third party (a servicing company)?

Expert Answer

Hi Jan,

A reverse mortgage is just like any other home loan – it is a loan that is secured by your property.  You can repay the loan any time you like and you can certainly sell the property if you desire.  You still own the home so you would still answer yes if asked “do you own your home?” (if you feel you need to answer the question at all). 

Servicing is a different issue.  Just because the entity who services your loan has a different name than your lender, it doesn’t necessarily mean that the lender sold the loan.  They could have a contractual arrangement with that company to provide servicing functions for them.  If the loan is sold, lenders are required to notify you of that fact.  On the other hand, loans held by lenders are assets.  They can be sold at any time, whether that is soon after closing or years from then.  Some lenders will tout that they are not selling their servicing as part of their sales pitch, but that could just be a current situation.  I can’t tell you how far back you need to go for certain at this point but I do know it is probably less than 5 years and you will see that every lender prior to that time who was a #1 lender and retained servicing prior to that time has since either closed their doors and stopped originating reverse mortgage loans, or sold their servicing for other reasons.  Financial Freedom, Wells Fargo, Metlife Bank, all were #1 at one point and none still originate today and most of their servicing is with other companies now – but they did not sell servicing while they were originating.  Markets and plans change and no one knows the future.  Other companies in the industry today may or may not be in business in the future or may sell their entire companies to others with different plans, or just their servicing at some point even if they don’t do so today.  If someone tells you they don’t sell their servicing they are talking about a current situation, that is not a promise for all time contained in the loan documents! 

The point?  If you get the HUD HECM reverse mortgage loan, they are all FHA insured loans and they all give you the same guarantees so make sure you get the best for you and your family at the time of your loan closing.  No one can promise you what will or will not happen in the future except what is written in your loan documents because that is the legal agreement between you and the lender. 

Also See: https://reverse.mortgage/servicing-setting-record-straight 

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Question From NIECE H. on 1/23/2018

HOW MUCH WILL I ACTUALLY GET OF (SAY 50,000) ONCE ALL THE FEES ARE TAKEN OUT. IF ALL THE FEES COST AROUND $6,000, THEN WILL MY SHARE ONLY BE $44,000 TOTAL? IF THE ANSWER IS YES...THEN I'M NOT SURE A REVERSE MORTGAGE IS RIGHT FOR ME.

Expert Answer

Hello Niece,

I can’t tell you what the amounts will be as costs differ in different parts of the country.  Some states and areas do have significantly higher costs and I don’t want to give you the wrong information but I’ll tell you what I can do.  We have our own mortgage loan pricing calculator, the All Reverse Loan Optimizer (ARLO) that is an online tool you can use to determine real time costs and benefits available to you based on your age, property value and the costs in your area.  ARLO doesn’t need any really personal information and never anything like a social security number to give you the information you are looking for.  We don’t believe that a reverse mortgage is right for all people either so the information is given to you without obligation and you will never get a high pressure sales pitch.  Give ARLO a try by clicking on his name here - ARLO - and see if the numbers work for you!

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Question From Wes on 1/20/2018

Is there any possibility that they will lower the age for people on disability?

Expert Answer

Good Afternoon Wes,

To my knowledge, there are no conversations at this time to lower the minimum age requirement for the reverse mortgage.  You may want to check HUD.gov to see if there are other programs in your area though that would better meet your needs.

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Question From Carol on 1/14/2018

If the mortgage company put insurance on home and a kitchen fire occurs will the fix it if you're still in it while in foreclosure?

Expert Answer

Hi Carol,

If you are talking about a force-placed policy, you really need to talk to the lender and the insurance company to see what is included and excluded from the coverage.  It will depend on the coverage and the extent of the damage.

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Question From Dennis B. on 12/13/2017

I'm 66 and my wife will be 62 in sept. 2018. I'm on ss and have a small pension. My total gross is 43.2 yearly. My wife will be applying for ss of $1.000.00 month in sept. We will be looking to buy a home in California for around $450,000.00 paying $225.000.00 down. My question is how long do we have to stay in the home in order to apply for a reverse mortgage? Can we apply after we move in? or do we have to wait for? We will have 50% ownership in the house as soon as we move in...

Expert Answer
Hi Dennis, 
 
There is no minimum time required and in fact, you can use the reverse mortgage as your financing to purchase the home and eliminate duplicate closing costs. The amount for which you will be eligible will depend on HUD parameters and interest rates at the time so feel free to visit ARLO™ for a free no cost no obligation quote. 
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Question From Lucille on 12/09/2017

I have a regular mortgage. At the closing I received $2000.00. Does this disqualify me from obtaining a reverse mortgage? If so would I have to take out a new mortgage with no pay out?

Expert Answer

Hi Lucille,

It does not disqualify you but it does mean that if you did this loan in the last 12 months, you cannot use the reverse mortgage loan to pay it off.  HUD changed that rule just a few years ago and so when you received the money on the refinance of the other mortgage, it just means that you either had to wait for 12 months before you could pay the new loan off with a reverse mortgage or you can pay off that loan with other funds that you have and then get a reverse mortgage to pay yourself back.  However, you cannot pay off a loan that resulted in  cash out of the home at the close of the transaction with a new reverse mortgage within 12 months of that cash-out loan closing.

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Question From Kathy H. on 11/16/2017

I been talking to a reverse mortgage guy he said I can't get a lump sum just half one year and half another is this true

Expert Answer

Hi Kathy,

“Kind of” but no, that’s not the exact answer.  The answer is so much more complicated than that so allow me to explain.

HUD allows borrowers up to 60% of their Principal Limit (the amount they receive in the reverse mortgage) or up to 100% of their amount if it is being used to pay what HUD calls “mandatory obligations” (existing mortgages, costs to get the loan).  If you don’t need 100% to pay off your existing liens and costs, but 60% would give you access to no money in addition to the liens and costs, HUD alters the deal to allow you to pay off all of the mandatory obligations plus 10% of your principal limit for cash to you at closing.  Any money that is not available to you under this calculation on the adjustable rate line of credit at closing or in the first 12 months is made available to you after 12 months’ time.  So if we are talking about round numbers for ease of illustration, if your Principal Limit for your reverse mortgage is $100,000 and you have no loan on your home, you could access any amount up to $60,000 at closing or in the first 12 months on the line of credit program and the remaining $40,000 is available anytime on or after day 366. 

Now with a HUD HECM fixed rate loan, the rules are the same as to what you can take at closing based on the existing liens on the home but there is a very large difference as to how you can choose to take the funds and also later draws.  The adjustable rate line of credit allows you to take “up to” the limits shown above while the fixed rate option requires to make a one-time lump sum draw of all funds available to you at the closing and then there is no second draw available to you.  So if you are using all of the line to pay off your existing loan(s) on the property, the HUD fixed rate gives you just as much money as the line of credit.  However, if you are limited on the initial draw by HUD’s 60% rule, then you lose the ability to take the remaining funds with the fixed rate program as there are no subsequent draws available.

There is however a 3rd option.  There are proprietary programs available that typically don’t work as well for many borrowers for a variety of reasons until the property value is at or over $1,000,000 but some borrowers have found that they did like the single draw, fixed rate option due to the fact that the proprietary programs do not limit borrowers to 60% of the program loan amount in the first 12 months.  The program is only available as a fixed rate, lump sum draw and the amounts available as a percentage of the home’s value are not as high typically in the HUD range (properties valued up to $636,150) but for many the immediate access to the cash they need has worked and only requesting a proposal and comparing will determine which option is best for you.

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Question From Richard C. on 11/07/2017

How do I stop paying my mortgage and get money every month?

Expert Answer

Hi Richard,

If you are 62 or over and you have sufficient equity in your home, you can consider the reverse mortgage.  To see if it works for you is very easy.  Simply go to our website and ask ARLO™ (All Reverse Loan Optimizer)!  Arlo is our own, real-time reverse mortgage tool that allows borrowers to see what they can expect to receive based on their information without any hassle or giving us all your personal information and your first born!  Give Arlo a try here ARLO, you’ll be amazed at how easy and accurate Arlo is (and how eager to please he is)!

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Question From Jan P. on 11/01/2017

Do I receive a lump sum when I receive a reverse mortgage settlment?

Expert Answer

Hi Jan,

If you choose the fixed rate, the lump sum is the only option HUD allows but if you choose the adjustable rate line of credit, you can take a lump sum, leave money in the line, get monthly payments of a combination of all three!

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Question From Gustavo R. on 10/24/2017

My house is paid in full can i still get money and live here?

Expert Answer

Hi Gustavo,

If you and the property meet the HUD qualifications, then yes, you can get a lump sum payment, a line of credit from which you can draw as long as the line still has money available or a monthly payment.  You can also choose to receive a combination of these features such as a lump sum at closing, a line of credit set aside for expenses and monthly payments with the remainder of the funds.  You should visit our website and request a proposal so that we can show you what is available to you.

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Question From Sara M. on 10/11/2017

Is it difficult to have an exact closing date with a reverse mortgage and how soon should I expect to receive the pre-close hud before the closing date?

Expert Answer

Hi Sara,

It's no more difficult than any other loan in that you never really know when all your services will be complete or if anything will arise in any of the steps that would create a delay.  A good example of this is when a previous lender or lienholder never filed a reconveyance on a paid in full loan, a new lien the pops up at the last minute, especially if it is not yours and we have to track down the lienholder to verify they have the wrong person or if something comes up on the appraisal that might require repairs. 

The closing statement is something that the closing agent and the funding department at the lender work out just prior to the closing of the loan.  The closing agent should be able to give you a pre-closing statement in plenty of time for you to wire money on a purchase and then this is usually with a small pad so that they will have sufficient funds if any last minute expenses come it.  On a refinance, you will see all the numbers at your signing and then you still have a 3 day right to rescind the transaction that does not include the day you sign or Sundays/holidays so that actually runs to 4 days or more that you have the opportunity to review the numbers before the loan is funded be the lender and closed.

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Question From Philip on 9/11/2017

I'm just turning 61 and interested in a reverse mortgage. Is it possible to do this? All I've heard is you've got to be 62.

Expert Answer

Hi Philip,

The minimum age for a borrower for the HUD HECM reverse mortgage is 62 years of age.  There were some proprietary or private programs several years back that have long since cease to exist that did allow for borrowers down to the age of 60 but I have not seen any of these programs since 2009 or 2010.  

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Question From Anthony on 9/10/2017

I am getting a reverse mortgage i am getting 250.000 line of credit.on my home i owe 40.000 dollars to my bank in a line of credit i have a 401 k with 50.000 i want to withdraw the 50.000 from my 401 k and pay my mortgage off and the closing fees for the loan and start off not touching the 250.000 good idea or bad

Expert Answer

Hi Anthony,

I am not a licensed financial planner and I would suggest you speak with one.  He/she will determine the benefits vs the costs of the actions you describe and also consider any penalties you might incur with such an action.  

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Question From Carrol on 9/02/2017

On a reverse line of credit is the line of credit my mortgage amount?

Expert Answer

Hi Carrol,

The line of credit is the amount of money available to you in the form of a credit line.  You can take the funds as a lump sum, as you need them or whenever you decide.  The line of credit can also be taken as a monthly payment and then later switched back to just having the funds available as a line that you draw from with any remaining funds at that time (there may be a small fee charged by the servicer to change later but it would not be greater than $50 as a rule).   The line of credit simply means that you are not taking a fixed rate, lump sum payment which requires you to take a full draw of all funds available to you.

You may have funds still available to you on the line or you may have used all the funds and there may be no funds still available on the line.  Your line of credit amount grows on the unused portion at a rate equal to the interest plus the MIP accrual rate.  In other words, if you had a total line of $200,000 and used $100,000, then the unused or remaining portion is $100,000.  If your interest is 4.5% and your MIP accrual rate is 1.25%, those total 5.75% and so the line would grow by 5.75% over the year you did not use the funds or $5,750.  This is not money anyone paid to you, it's more like a line of credit increase.  At the end of the year, your available credit line would be $105,750 and would continue to grow on the unused portion each year giving you even more money available. 

Learn more about the line of credit and the growth rate here.

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Question From Pam W. on 8/14/2017

I live in the state of California and I would like to know if someone has a reverse mortgage on their primary residence now can they go on title only to another property that will not be their primary residence? Also, are they able to buy other property while they are in a reverse mortgage on their primary residence?

Expert Answer

Hi Pam,

Absolutely.  There is no limit as to the number of homes you can own just because you have a reverse mortgage on your primary residence.  

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Question From William H. on 7/26/2017

If I take out a mortgage on the home I am purchasing as my primary residence, is there a waiting period to do a reverse mortgage?

Expert Answer

Hi William,

There is no waiting period but the lender may want to use the original purchase price or the appraised value, whichever is less, if the purchase price is much less than the current appraised value, you purchased very recently and there is no evidence of massive improvements to indicate the value increase was a result of your investment in the home.

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Question From Alfred on 7/19/2017

I am 75 years old in Texas. I have been living in my home for 15 years, and I even have a life estate on the property, but I do not own the home. I am now in the process of buying the home with an FHA loan, and the owner is selling me the home for their mortgage balance, which is less than half of the home's value, so I am getting a good deal. How soon after I close can I then apply for a reverse mortgage? I'm not sure if I have to wait the 12 months, or if because I can prove I've lived in the home for so long can I apply right away? Thanks!

Expert Answer

Hello Alfredo,

I can't say for certain without seeing everything, but I believe you will need to wait for the 12 months.  Just living there for so long does not get you anything necessarily unless you paid above fair market rents while living there and had a written agreement.  Otherwise you are best to wait the 12 months and do the refinance at that time.

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Question From FAITH M. on 7/08/2017

I OWN MY TOWNHOUSE NO MORTGAGE OR LEAN WOULD I BE ABLE TO GET A REVERSE MORTGAGE. THERE IS 5 HOMES IN A ROW THE END HOMES ARE SINGLE STORY AND THE OTHERS ARE TWO LEVEL MINE IS TWO LEVEL

Expert Answer

Hi Faith,

Nothing you have me would lead me to believe you would not be able to get a reverse mortgage. The legal description of the project would determine if it is an actual townhome or a condominium though and condos have to be approved by HUD at this time. All properties have to have adequate sales of similar properties available for the appraisal bit other than that, everything sounds good so far.

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Question From Robert M. on 7/08/2017

Is there any lender that does not require FHA approval?

Expert Answer

Hi Robert,

Almost all reverse mortgages originated today are FHA-insured loans.  The proprietary or private loans that were increasing prior to the market meltdown all but disappeared in 2009-2010.  There are just now one or two proprietary programs beginning to re-emerge, but their loan amounts as a percentage of the value of the property are much lower in most instances, the interest rates much higher and the underwriting parameters are stricter.  They usually do not begin to make sense for most borrowers until the property value meets or exceeds somewhere around $1,500,000 but it varies based on age, program needs, etc.  If you are just looking for a higher initial draw on a property that has no current liens and the value is not this high but is above the HUD lending limit of $636,150, the proprietary programs currently available may still meet your needs.  If you have a condo not on HUD's approved list, the proprietary program requires condos valued up to $636,150 to be on HUD's list as well anyway so it would not help (and HUD has announced they are making changes that will ease the process for condos probably in September anyway). 

So the question still remains what keeps you from meeting the HUD parameters that you think might be acceptable to a private program?  If the programs ever return that were available prior to the market melt-down, there may be some additional options available again that FHA/HUD has not typically allowed but for now, the FHA-insured loan is most of the market.

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Question From Maureen M. on 7/06/2017

Hi, I live in California, my husband is 63 and I am 57, he is ready to sign for the reverse mortgage, and I wish to wait a little longer to ask questions of an Attorney. We have already started with AAG in Orange. My questions please: Can I refuse to take my name off of the title of the house? If my husband goes forth with this reverse mortgage and my name is off of the title, once the loan closes can I put my name back on the title?Also because of our credit being very low, we only qualify for a Fresh Start Reverse Mortgage and I need some information on this please. We went through counseling with Care Credit aka Springboard and I asked the counselor if there is a debit to income ratio, regarding checking our credit and said there was not but AAG is telling us there is a credit check?I left a message on the voice mail of the AAG loan provider explaining that I would like to think about this mortgage a little more and I would like to contact an attorney. Do I have a right to stop this from going through? Please help, I am so confused.

Expert Answer

Hi Maureen,

These are all great questions and all deserve an answer.  I would contact the Loan Officer one more time and give him/her one more chance to answer these questions to your satisfaction and if he/she will not take the time to do so, there is a good possibility you have not chosen the right company for the loan.  We have written about most of these subjects on our blogs and have covered each of these topics but you should be able to get a straight answer to your questions because you do have rights and no, you are not legally required to sign away your interest to the property and should know what you are doing and why.

Perhaps you and your husband should get other proposals from other companies and compare the costs and their willingness to answer your questions IF you are unable to get a satisfactory answer to your questions.  Besides, it is never a bad idea to compare the closing costs and get more than one proposal anyway!

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Question From Harry on 7/05/2017

Can a reverse mortgage pay for existing solar bank loan

Expert Answer

Hello Harry,

The only restriction that the reverse mortgage has is that it will not pay off a loan on the property that is less than one year old.  If your loan for the purchase of a solar system is over 12 months old, then not only can the reverse mortgage pay it off, it would have to in order to take the first lien position and ensure that no other liens were remaining on the property at the time the reverse mortgage closes.

Also See: https://reverse.mortgage/solar

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Question From Carol T. on 6/24/2017

If I sell my home for a home for seniors can I also get a reverse loan for second property if I can no longer live in first home ?

Expert Answer

Hi Carol,

I can only assume you have a reverse mortgage on the home you are asking about selling, correct?  In that case, when you sell the home, the reverse mortgage would be paid in full with the sale.  At that time it would not matter to whom or for what reason you sold and yes, as long as you complied with the terms of the first loan (you paid your taxes and insurance on time, etc), you would be eligible for another reverse mortgage loan.

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Question From Ralph W. on 6/12/2017

Let's say my home is worth $43000. Total mortgages $18000. Would a reverse mortgage work for me? Thank you, Ralph

Expert Answer

Hi Ralph,

Chances are good that there will be enough to pay off your existing loan but that's not for certain, it would depend on the age(s) of the borrower(s).  But even if it would pay off your mortgage balance, only you can make the decision of the costs are too high based on the benefit.  Let me explain that.

Many of the costs are fixed and depending on where you live, you might have as much as $5,000 or more in loan costs to pay off an $18,000 mortgage which may or may not leave you any money, depending on the age of the youngest borrower (or non-borrowing spouse) to be considered for the loan.  And if the youngest borrower or non-borrowing spouse is 62 or younger, you might even have to bring in a little bit of money just to close the loan.  Only you would be able to decide if it would be worth it under those circumstances to proceed with the only benefit being the elimination of the $18,000 mortgage.  With possible costs of close to 30% of your existing mortgage though, I certainly would not recommend the loan for your circumstances.

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Question From Clover on 6/08/2017

If I have to bring money to closing for a reverse mortgage, (appraisal came up short) can I borrow some of the money to do so?

Expert Answer

Hi Clover,

HUD does not allow the use of borrowed funds.  They do however allow you to use gift funds from a friend or relative.  Also, depending on how short you are, have you checked to be sure you are getting the best possible deal and the most possible fees paid?  I would certainly make sure that you are getting the absolute most out of your loan by getting another bid to be certain that there is not more with which the lender can help you. We have many programs available where we can cover some if not all of your closing costs bringing that shortfall down to a minmum. Please request your free quote here

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Question From Holdaway on 6/05/2017

If I do a reverse mortgage will my renter's (basement apartment) still pay me rent or does that go to a lending company?

Expert Answer

You always own your home.  Every Deed of Trust contains an "Assignment of Rents" should the lender need to foreclose but absent such an event, the rents still go to you.

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Question From J. Armstrong on 5/28/2017

I was looking at approved lenders on HUD.gov, but was not able to locate All Reverse Mortgage. I'm following the directions they gave. Any idea why your company is not coming up on their list?

Expert Answer

Good Morning,

I don't know how you were conducting your search, but if you go to the HUD website (HUD.gov) and in the search box in the upper right hand corner type in "approved lender list", you will have the opportunity to type in the names you wish to search.  I just did so and typed in All Reverse Mortgage and these were the results I obtained:  As you can see, all three of our branches do show as approved lenders but I really don't know what you search or did differently so I can't comment on why they didn't show on your search.  We are there and are an approved lender though and it does show when I do the search so I would just say try again, maybe there was a glitch when you last attempted or possibly a misspelling?

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Question From Steve M. on 5/24/2017

Hello, The deed to my house is in my name and my spouse. There are no leins or mortgages on my house She resently passed away. Do I have to get the deed in my name before applying for a reverse mortgage?

Expert Answer

Hi Steve,

There are some things that the title company will have to do in order to insure the title now with the change but if you supply the necessary documentation to the title company in conjunction with your loan, they can take care of that for you while completing the loan process.

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Question From Jim on 4/27/2017

From application to making money available- what is the time table?

Expert Answer

Hi Jim,

If you mean by making money available the day the loan funds, a lot of that depends on you and your location.  We cannot begin processing your loan until you have completed the HUD required counseling.  In some states (like CA), there is a waiting period after the counseling before we can do anything on the loan other than just send out the application.  In California, that wait is 7 days.  In some other states and in rural areas, appraisals take much longer than in metropolitan and suburban areas.  Colorado, Washington and Oregon are notoriously longer turn times for appraisals and in rural areas of the country it can be the same case in any state.

But assuming you have your counseling done and you do not live in an area where appraisals take longer to complete, we count the time from the date the completed and signed loan application is returned to this office and that can usually be completed in 35 - 40 days assuming no appraisal or title issues that we have to resolve (and then the delay can be just a day or longer depending on the issue and how quickly it can be resolved).  The loan will close after the federally mandated 3 day right of rescission which does not count the day you sign your loan documents and do that is a minimum of 4 working days which do not count Saturdays or holidays.  Then your proceeds are wired to your account.  If you take extra time to return documents or the signed loan package, that would be extra time that would not be included in this timeframe and that's why this answer started with "a lot of that depends on you and where you live"... 

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Question From Moele on 3/31/2017

How is the "upfront" first year money calculated? what if we need more than is allowed,say by about 5000 dollars can we get waiver or something. we have two things we feel are important to get done and the cost is higher than the first year draw that is allowed (after the mortgage payoff)

Expert Answer

Good Afternoon,

There is no waiver process and the benefit amounts and payouts are not flexible outside of the HUD prescribed availabilities.  Unfortunately, there is no third tier to determine and price additional payout options/risks and so the maximum payouts are not negotiable outside of the already flexible parameters offered under the HUD programs.

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Question From Dean D. on 3/16/2017

I have already helped my mother secure a reverse mortgage. We received a solicitation for a 2nd mortgage leaving the 1st reverse mortgage in tact. Is that possible? Would the 2nd mortgage require monthly installments? OR would the 2nd mortgage be a reverse mortgage as well?Thanks,Dean720-334-2101

Expert Answer

Hi Dean,

There's absolutely no issues with you taking on another second mortgage as long as the lending institution agrees to go behind the reverse mortgage which would actually be in third position since the reverse mortgage lender and HUD take both first and second positions against the property.

The home equity conversion mortgage program will allow for subordinate financing. Having said that you may want to double check on that offer I have never seen a bank or anyone offer an equity line of credit behind a reverse mortgage loan due to it negative amortization nature. 

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Question From VIRGINIA on 3/07/2017

CAN YOU CANCEL AFTER YOU HAVE SIGNED THE REVERSE MORTGAGE DOCUMENTS IF YOU ARE NOT HAPPY WITH THE INTEREST RATE AND CLOSING COSTS.

Expert Answer

Hi Virginia,

There is a 3 day right of rescission that actually runs for 4 days or more since you cannot count the day you signed, Sundays or holidays that you can still cancel the transaction just by notifying the lender.  If this is your intent, do not let the time pass though because they will fund the loan after the rescission period if you have not cancelled by then.

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Question From Kay D. on 3/06/2017

My goal is to leave a debt free home to my heir. So I intend to pay back the loan. What would my payment be on 75000.00? The loan is to remodel.

Expert Answer

Hi Kay,

There is never a prepayment penalty on a reverse mortgage so you can certainly pay the loan off in any timeframe you desire.  The Payment amount required to pay a loan in the amount of $75,000 off in full would depend on the timeframe in which you wanted to be able to pay the loan off.  Since I don't know your intended timeframe, I can't tell you how much you need to pay monthly.

But you can use just about any amortization schedule online and plug in different timeframes or payment amounts to make this determination.  We also have an amortization schedule we have developed that requires your computer to have the Excel program to run. 

Link to our free calculator: https://reverse.mortgage/amortization-calculator

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Question From Webb on 2/24/2017

Can you get a reverse mortgage when you don't have a loan on the property.

Expert Answer

There is no requirement that there is an existing loan on a property in order to obtain a reverse mortgage, only that if there is a loan, it must be paid off first with the proceeds and then the borrowers can use the remaining reverse mortgage proceeds for any purpose they choose.  If there is no current loan, there is nothing to pay off and borrowers have full use of all proceeds in accordance with HUD payout provisions.

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Question From Don on 2/14/2017

What is a reverse mortgage "line of credit" and how does it work?

Expert Answer

Hi Don,

A reverse mortgage line of credit is very similar to a Home Equity Line of Credit (HELOC) in many ways but different in some very key areas.  It is similar in that your limit is established based on the lending criteria and then you can draw on the line as you need the funds.  You do not accrue interest on any funds you are not using and if you decide to sell the home and move, you only pay back the portion of the line that you actually used plus any interest that accrued (which could be a very small amount of the line or all of it depending on your needs and wants).

Those are the similarities, but there are some very big differences as well.  The loan can never be closed at the whim of the lender if they should decide they are no longer in the business of originating credit line loans, they feel your value may have fallen or that your income may have changed as many people experienced when the credit market changed dramatically around 2010.  Unlike the many borrowers who suddenly had their credit lines frozen or closed, the reverse mortgage line of credit is backed by the full faith and credit of the federal government and you never have to worry about losing your available line when you need it most.

There are no payments due with a reverse mortgage line of credit.  Unlike a HELOC where your payment amount may increase, and sometimes sharply if you end an interest only period and begin the repayment period, the reverse mortgage line of credit has no payment due for as long as you live in your home.  However, even though there is never a payment due, there is never a prepayment penalty and so you can choose to make a payment of any amount at any time up to and including payment in full at any time without penalty.  This means that if you want to make a payment to keep your balance from growing, you can.  It's entirely your choice though and so there is never a late charge or a concern about credit implications if you can't make a payment in any given month or you want to reduce the amount you like to pay because there is nothing due in the first place.  This gives borrowers flexibility and freedom from credit concerns.

Another phenomenal feature of the reverse mortgage line of credit is the growth feature in the line.  The reverse mortgage line grows on the unused portion so that each year you have remaining funds that you do not use, the line of credit available to you becomes larger.  Instead of having your line cut or frozen by the bank, your line is growing every year on the unused portion of the line by an amount equal to the interest accrual rate plus the MIP accrual rate which is currently anywhere from approximately 5 - 6% per year.  This is not interest anyone is paying to you, it is simply an increase in the line available and if you do end up borrowing it, you will accrue interest on it but on a $100,000 line of credit that is not used for 5 years, that would give the borrower a line of credit available of over $132,500 at current rates!  Some borrowers with higher values start with lines at or above $375,000 and their lines with this same 5 years of growth can exceed $500,000 with even the slightest of interest rate increases.  It's not hard to see how the reverse mortgage line of credit has become an extremely viable retirement tool, especially for younger borrowers who don't plan to utilize their line for 10 years or more. 

The only other real difference is that you don't get a card or a checkbook and you request the funds from the line when you want them from your loan servicer.  This is done to protect you as much as anyone else so that others may not "spend" on your account, it requires you to make a withdrawal from your line.  Once you do though, the funds are wired to your chosen bank account and so you have them within a couple days and with a wire, you don't have to wait for the checks to come in the mail or for the checks to clear before you can use them, regardless of the amount.  Now that HUD limits the amount borrowers can receive in the first 12 months based on the mandatory obligations to be paid (existing loans to be retired and costs to obtain the loan), the line of credit reverse mortgage has become by far the most popular option for reverse mortgage borrowers.

Also see: Why a Reverse Mortgage is SMARTER than a HELOC

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Question From Douglas F. on 2/13/2017

Can anyone foreclose on the property for any reason as long as the taxes and insurance are paid and the property is being occupied by the owner?

Expert Answer

Hi Douglas,

The reverse mortgage is a loan and just like any loan, the lender only has the rights that you give to them in the legal documents.  I would suggest that you get a copy of the legal instruments that set the rules between you and the lender - the Note, the Deed of Trust or Mortgage and the Loan Agreement and then not only read them yourself but also have them reviewed by your legal advisor.  There are specific sections that deal with the "Grounds for Acceleration of Debt" that address of the circumstances the lender can call the loan due and payable.  Failure to pay the taxes and insurance and any other property charges are covered; one original borrower must still live in the home as their principal residence; the borrowers may not have sold or transferred all of their interest in the home without at least one original borrower still retaining their title; at least one borrower fails to reside in the home for a period of 12 consecutive months or more; the borrower may not commit waste or destroy damage or substantially change the property (turn it into a hotel for example) or allow the property to deteriorate beyond reasonable wear and tear. 

All the terms are contained in the legal documents and are clear and pretty straight forward.  And as I started out saying, no lender has any rights that you do not grant to them as the property owner so take the time to review the legal documents in advance to make sure you are comfortable with the promises you will have to make in order to procure the loan.

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Question From Dee on 2/11/2017

Can I use a RM so I no longer have monthly payments? I have a little under 50% equity in my house.

Expert Answer

Hi Dee,

Many people use the reverse mortgage to do exactly what you ask - pay off their existing loans and become payment free.  Some people do use the loan so that they have access to additional cash, but for many, eliminating the mortgage payment they have been paying month in an month out gives them access to the additional cash they need just by the virtue of having that money available to them to use instead.

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Question From Richard W. on 2/07/2017

Could you please answer 3 questions, How do you determine if a condominium qualifies for the reverse mortgage? And, what if the applicant has some credit issues on a credit report? What kind of costs & fees are incurred?

Expert Answer

Hi Richard,

Let's start with your last question.  Costs and fees are dependent on market conditions and subject to change.  The only way to know that for sure at any given point in time is to contact us and request a proposal on your specific circumstances. 

The condominium must be on HUD's approved list that can be found on their website here.  Simply put in your zip code on the first page and all the projects that have been submitted to HUD for consideration in that zip code will appear.  Don't forget to look to the right to see the current status as the list includes projects that are approved, were approved but expired and were rejected.  Only approved projects are eligible.  HUD is currently reviewing a process to allow individual units in some projects that are not currently approved that used to be known as their "spot approval" program.  If an when they reinstitute this program or one like it, they will have another way to do loans on some units that are not on this approved list but we do not have the parameters of that program at this time as it is no yet in effect.

I hate to defer, but "some credit issues" is much too vague to comment on here.  There are some credit issues that can be easily resolved with a letter of explanation and supporting documentation, some that would require us to set funds aside to pay taxes and insurance and some that might prohibit us to do the loan.  If they are old and minor enough, we may not even have to address them.  At any rate, I am afraid to answer this question with any degree of accuracy we would need to have you contact us to discuss the individual issues, dates when they occurred, final outcomes and the overall creditworthiness of the borrower.

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Question From Jim P. on 1/26/2017

I have filed a Reverse Mortgage with a local agent in September. They lost the FHA Case #, the underwriter has had the documents since early November and still has not reviewed the taxes. My home appraisal was done in September.The home is in my wives name. She is 71. The home was appraised for $640,000. The mortgage balance is $73,000. Does it make any sense to move the process to you?

Expert Answer

Hi Jim,

You appraisal is good for 120 days before the appraisal becomes expired.  If your home was appraised in September, the appraisal is either expired by now or is about to become expired at which time the case number has to be cancelled and a new loan must be started at that time.  Only the lender who ordered the Case Number with HUD can cancel it so if you transfer it now, the new lender would need the cooperation of the existing lender to cancel the old Case Number (either now or as soon as the appraisal expired) so that the new lender could proceed with the loan.

We have taken many Case Transfers from borrowers who just decided it was time to move, but unlike some originators who encourage borrowers to move just because they want the loan, we think you should not do anything unless it makes the most sense for you!   I have to believe if the loan has taken this long, there is something that is impeding the progress and you really should find out what that is.  That last thing you want to do is to order another appraisal, wait for weeks or months again only to find out that there is some issue that the lender cannot resolve that might be an issue for any new lender as well.

If your loan officer is not communicating with you, I would suggest a call to the manager or higher until you get your answers.  We would be happy to help you, but I would never suggest that you do anything that would make it even tougher for you and it just could be that communication with someone may let you know what the holdup has been.  It does not take that long to close a reverse mortgage so it would be really beneficial to know why it has been delayed before you incur additional costs and delays.  If that still doesn't work, give us a call!

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Question From Paul on 1/24/2017

Do you need a mortgage to get a reverse mortgage

Expert Answer

Hi Paul,

Borrowers may apply for and receive a reverse mortgage if you have a current mortgage that needs to be paid off, multiple mortgages or no mortgages at all.  Your benefit amount or reverse mortgage loan amount is determined by your age (or the age of the youngest spouse or borrower to be on the loan), the value of the home or HUD's maximum lending limit of $636,150 (whichever is less) and interest rates in effect at the time.  They all go into the HUD calculator and the benefit amount is determined based on this criteria.  From the loan amount or what is referred to as the Principal Limit, all fees and existing loans/liens must be paid and then the remaining funds are yours to use at your discretion, just like a forward refinance loan.  If you have no loans on the home, you may use the money for any purpose you choose.

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Question From Carmen A. on 1/17/2017

If I am in Florida, do you have personnel here I can meet with?

Expert Answer

Hi Carmen, We service all of Florida and 15 other states, in fact we are one of the highest rated reverse mortgage lenders in all of Florida. We are able to pass a significant savings along to our customers by working with you from our headquarters in Southern. I assure you our pricing is the best and service to match.

When you apply we overnight the application with a prepaid UPS envelope for return. We will then send out a local FHA qualified appraiser who knows and understands your market so that you receive a fair appraisal and when it's time for your closing we send a traveling notary to your homes you don't have to go anywhere. If you'd like to compare our offer to any company I think you will find that you will get more money from your equity. You can request your quote here and I would be happy to email you back complete analysis by email. 

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Question From Ruth L. on 1/03/2017

If you have a reverse mortgage, can you sell your home and how does that work?

Expert Answer

Hi Ruth,

Yes, you most certainly can sell your home if you have a reverse mortgage and it works just like any other loan.  You own the home at all times and just like a borrower with a forward or traditional loan, you can sell your home at any time.  There are no special requirements and the payoff is handled through the escrow, just like any other transaction.  The escrow/title officer/attorney (whoever is handling the closing of the transaction) will contact your current lender and obtain a Beneficiary's Demand for Pay Off from which the loan can be paid in full at closing.

You receive a monthly statement so although that is not a payoff statement (just like forward loans, there are always some additional fees at payoff and interest that accrues after the time of the statement) but this will give you an idea of the amount owed on the home for calculation purposes.  It may not be as accurate as the Demand that the closing agent receives, but it will give you a general idea of the amount that will be required to pay the loan off and therefore you can determine how much you will have left over after you pay any real estate fees/commissions and other costs to sell the home so you can determine how much cash you will have at the close of the transaction at any given sale price.  Your real estate agent can probably help you with this as well.

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Question From R. Reinhart on 12/06/2016

Where is your business office?

Expert Answer

Hello Mr. Reinhart,

Physically our corporate office is located in Southern California but we are licensed in multiple states (over 15 and growing).

Locality really means nothing these days as technology allows lenders operate nationally we are able to overnight you and application and once returned we send out a local qualified FHA approved appraiser that knows your market. When it is time to close your loan we will send out a traveling notary to your home with your final loan documents.

Our process is streamlined and the cost savings to you is worth your while comparing with any local broker or loan officer.

Request a formal quote here https://reverse.mortgage/quote or feel free to call our experts at 1-800-565-1722. 

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Question From William B. on 11/18/2016

I am 73 and my wife is 70 and our home is under water, we paid $350.000 and loan was down to $325,000 we invested over $120,000 and with late payments we are over oweing $400,000. My attorney said she had a friend that was under and only pays taxes and insurance and no money. Is this possible

Expert Answer

Hi William,

It is true that borrowers who have used the reverse mortgage program do only pay their taxes and insurance and the maintenance and upkeep on their homes, they have no monthly mortgage payments.  However, to get the loan in the first place, you have to have a strong equity position in the home because you are allowed to stay there for the rest of your life without making any payments.

So while the loan does allow you to make no more payments for as long as you live in the home, you would not be able to pay off existing liens that exceeded the value of the home.  You can see exactly what amount for which you would qualify based on the value of the home and the ages of the borrowers by visiting our mortgage calculator at https://reverse.mortgage/calculator

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Question From Jackie T. on 10/19/2016

I own my Colorado home (no mortgage), which has an appraised value of $450,000. I have a net worth of $2 Million. As of last year, however, my home and other personal assets are being used as collateral on a commercial real estate loan, which is approximately equal to the appraised $450,000 value of my home). Can I get a reverse mortgage under this circumstance and use the proceeds to purchase a second vacation home worth approximately $250,000?

Expert Answer

Hi Jackie,

If the home has a lien on it now, that lien would have to be removed in order to close the reverse mortgage, otherwise it would have to be paid in full with the reverse mortgage proceeds.  That leads you to another issue.  If you have a current loan on the property, HUD allows you to take up to 100% of the benefits to which you are entitled if you are paying off existing liens or other "mandatory obligations" (I won't get into the entire HUD calculation here) but if you have no liens on the property, HUD will only allow you up to 60% of the Principal Limit or your benefit amount of the reverse mortgage at closing or in the first 12 months of the loan.

To better understand the amounts available to you and when, you should request a proposal and you will see what you can expect to receive based on your age, property value and existing liens and the timing of the payouts.  It may or may not work for you if you want to buy other property with the proceeds or you may have to wait for 12 months before you have access to adequate funds to do what you are seeking.

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Question From Salvatore S on 10/08/2016

Question #1HOW MUCH INTEREST IS ACCUMULATED ON A $100,000 REVERSE MORTGAGE AT THE END OF 10 YEARS TO PAY BACK.. Question #2WHAT IF YOUR HOUSE PROPERTY DEVALUES WAY BELOW AMOUNT GIVEN AND YOU HAVE NO WAY TO ECONOMICALLY PAY BACK..EA.HOUSING SLUMP....Question #3S IT POSSIBLE TO PUT ONE OF YOUR CHILDREN ON THE OFFICIAL LOAN APPLICATION SO AS TO KEEP HOME IN FAMILY AND HAVE A PLACE TO LIVE IN AND RAISE A NEW FAMILY (GRANDCHILDREN)...THIS WOULD BE WHAT AMERICA STANDS FOR... PURSUIT OF HAPPINESS..TRUE GOVERNMENT RESPONSIBILITY IN THESE TYPES OF MATTERS SHOULD ALLOW FOR THIS KIND OF LOAN.. THAT'S WHAT MAKES AMERICA GREAT..TAKE OUT THE GREED.. AND HAVE FAITH IN ITS TRUE CITIZENS....SINCERELY

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Question From Lupe I. on 9/11/2016

Do I still own my home, with the reverse mortgage? What happens to my house once I pass away? Will my children have the option to take over my home, and if so what will they have to do and how long do they have to make that decision they are given?

Expert Answer

Hello Lupe,

Yes you will always own your home providing that you are living in this house is your primary residence and maintaining the property taxes and homeowners insurance. The reverse mortgage is nothing more than a loan against your home equity that must be repaid at a later date. You are welcome to make any type of interest repayment back if you would like or choose to defer the interest until the loan is paid off later through either sale or a refinance.

You are still responsible for maintaining the property taxes and homeowners insurance. Your heirs will receive your home however you have your estate set up and they would be required to refinance within six months or have up to 12 months by filing extensions to sell the home after your death.

You can read more about how the reverse mortgage works in plain English here: https://reverse.mortgage/what-is-a-reverse-mortgage/

Be sure to request your quote here https://reverse.mortgage/quote or call our offices toll-free 1-800-565-1722 

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Question From Todd S. on 8/21/2016

How is the credit growth rate determined? Liberty reverse mortgage said their's was around 4% compounded annually.

Expert Answer

Hello Todd,

The HECM line of credit growth rate will always match your total interest rate charges to your outstanding loan balance. You will need add the note rate plus the 1.25% insurance rate to determine the monthly charges to your balance as well as the growth rate for that given month.

If another lender is quoting you a 4% monthly growth which also must include the 1.25 insurance they would likely be quoting you a monthly adjustable loan which also comes with a very high lifetime cap (10% over the current interest rate).

If you are looking to a cumulate interest right now at the lowest rate possible the monthly adjustable might accomplish that but if you are looking for the largest line of credit growth currently available today might take a look at our annual adjustable rate plan with a minimum monthly growth rate at a current 6.27%

If you would like a direct comparison just request a quote and we would be happy to return you line of credit analysis.

I've also written an article around this topic you may find helpful here https://reverse.mortgage/line-of-credit/

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Question From Shirley on 8/13/2016

Can I get a reverse mortgage if I have a mortgage on my home?

Expert Answer

Hi Shirley,

It's a misconception that you must have a free and clear home to get this type of loan . As long as there is sufficient equity in your home for us to pay off the mortgage in place you would be able to obtain a reverse mortgage. The amount of funds available are based on your age and the property value. Feel free to request your quote here and we would be happy to return your qualifications. 

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Question From Linda on 8/09/2016

If we had a reverse mortgage and sold our home is there any penalty fees for paying off balance early? AND on a reverse mortgage can a line of credit be set up to get money just as someone wants to for home improvements and NO monthly income?

Expert Answer

Hello Linda,

There is never a prepayment penalty on a reverse mortgage loan and you are welcome to repay the interest monthly or in full by selling or refinancing. (It's treated like any other mortgage in that respect) We will send you a monthly statement so you always know what is going on activity wise on your reverse mortgage balance and it's entirely up to you whether you decide to repay the interest or allow it to defer.

The line of credit will not be set up as a monthly payment to you but you can certainly draw from your line of credit any amount available as often as you would like without any servicing fees. We would wire the funds requested typically within 24 to 48 hours of your withdrawal request. Depending on your situation the line of credit may be a better option than the Tenure payment plan given its automatic growth rate and flexible payment withdrawals. You can learn more about the differences between LOC and Tenure here or feel free to call us toll-free 1-800-565-1722. 

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Question From Michael J B. on 7/26/2016

What about when we older and need in home health care. Can we access money to paycaregivers?

Expert Answer

Hi Michael,

As long as you still have money remaining in your line of credit, you may access it at any time, for any reason, as long as you still live in the property and you are meeting the program requirements.  You should read your legal documents as a new bankruptcy, tax default, or failure to pay the insurance on the property could result in an interruption in the access to available funds.

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Question From Don on 7/09/2016

Can one of the borrower's on the loan apply for a reverse mortgage without the other borrower's permission / signature?

Expert Answer

Can one of the borrower's on the loan apply for a reverse mortgage without the other borrower's permission / signature? 

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Question From Luis C. on 7/06/2016

Must funds for reversed mortgage be seasoned or come from seasoned account

Expert Answer

Hi Luis,

If you are referring to the purchase program or to a borrower having to bring cash in to close, HUD does require the same seasoning and source of funds verification as they do for any other loan.  We would need to have 3 months' bank statements with the funds in the account and no large deposits or the deposits would have to be sourced (sale of a property, etc).  

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Question From Susana on 7/01/2016

Is there a way to "partner" a reverse mortgage, leverage a LOC, with an asset based long term care product? The end result providing a way to fund LTC if needed, a death benefit and leave $$ to heirs? If so, how does that work?

Expert Answer

Hello Susana, 

We don't deal with any financial products other than the actual mortgage.  I would typically recommend utilizing the line of credit growth to ensure funds are available for future needs but without knowing the borrower(s)' age(s), the property value and potential long term care needs, I really can't say how much money the loan would supply and what would be available in relation to what the borrower(s)' needs are.  I would definitely advise to consider the line of credit option where the line grows on the unused portion and interest does not accrue on any funds you do not borrow thus leaving the most possible money for heirs as opposed to the single draw, lump sum option that leaves no funds to grow in the line of credit and begins to accrue interest on the entire amount from the beginning.  To be certain though, I would recommend you seek counsel from a financial planner who can run all the different scenarios for you.

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Question From Rebecca E. on 7/01/2016

My parents have passed away leaving me to deal with their reverse mortgage on their home. There are old trailers, an old rv and old car rotting on the 2 acre property. I am going to give the mortgage company my parents home, as is...will I be responsible for those things that they will need to haul away?

Expert Answer

Hi Rebecca,

Your parents signed an agreement with the lender, you signed nothing!  The loan is a non-recourse loan meaning the lender cannot seek repayment from any other assets.  If the lender is forced to take title to the property to repay the obligation, they cannot look to you to repay them for any other costs as a result of doing so.

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Question From David E on 6/20/2016

If I got a “credit line” reverse mortgage from you company, what would the current interest rate be... and would it be a "fixed" or "variable" interest rate?

Expert Answer

Hi David,

All Line of Credit loans are variable interest rates, HUD and GNMA ("Ginnie Mae" which is the Government National Mortgage Association which is the agency that issues the bonds backed by government loans of which the FHA-insured reverse mortgage is one) will not allow any lender to do a fixed rate line of credit loan.  At one point, a few lenders did try to introduce them but they were very short-lived.  Because the line of credit grows on the unused portion over time, the fixed rate would present too great a risk at later dates if rates were to rise suddenly and borrowers chose to try to borrow at rates against credit lines that were well-below current funds available.  HUD and GNMA moved swiftly to eliminate the possibility for fixed rate lines of credit and therefore, no lender offers them.

And with regard to your open request for rates, I would encourage you to contact our office for a free, no-obligation rate quote.  Rates change weekly at a minimum and there are often different options available for borrowers that change the best program for them.  A higher margin will accrue more interest on borrowed funds, but will also have a higher growth rate on the unborrowed line.  There are also times when borrowers prefer to have lower fees that can often be structured with different margin options.  And blog questions such as these stay on a website indefinitely and rates available today may not be indicative of those in the future.  Please feel free to contact our office or request a quote here

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Question From Betsy on 6/20/2016

Can you get a reverse mortgage if you have an equity line account on the property with an outstanding mortgage.

Expert Answer

The equity line would have to be paid in full and closed with the reverse mortgage proceeds and there are restrictions about the seasoning of the loan and when the last draws can be taken, but the answer is yes, you can pay off an equity line with a reverse mortgage under most circumstances but the line must be closed after it is paid in full.

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Question From Arnold C on 5/06/2016

I will be submitting an application soon. We will be out of town the end of May and first part of June, so a convenient time for an appraisal of our property will be about June 10th - June 17th. Considering this, should I submit my application now or wait? Also, Since we are retired, what paperwork will you need ? Social Security Benefit Statements & Pension Award letter?

Expert Answer

Hi Arnold,

Let's start with the needed documentation because you have hit it right on the head!  The benefit statements and award letters will do nicely for the income.

Keeping in mind that some areas of the country have a longer lag time, require a greater lead time for ordering appraisals and that is a busy time for appraisers, it would be best to be sure that everything is ready to go well in advance and then we can order the appraisal with instructions to hold off until your timeframe.  If have not done the counseling, you need to be sure that is also completed well in advance since California and other states impose their own waiting periods before we can start the loan (CA requires us to wait for 7 days after the counseling is done before we can order any services whatsoever).

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Question From Maria A. on 5/03/2016

I want to know the details of a Reverse Mortgage program in which you buy the house and we continue living in it until we die. We are 71 and 70 years old.

Expert Answer

Hi Maria,

It sounds like you are under the same misconception a lot of people believe about reverse mortgages. The lender does not buy your house they give you a loan based on your ages and the value of your property and you do not have to make any payments on that loan for as long as you live in the property. And yes, you can live in the property for the rest of your lives.

Because you still own the property, the equity in the home is always yours and you are responsible to pay the taxes and insurance and maintain the home. I would be more than happy to give you a proposal based on your own individual information.  If you would like to go to our website at reverse.mortgage and request a no obligation proposal, we will send you all of the different programs for which you qualify, the amount you would receive and what options you have the receipt of your funds. There is no obligation and we are not a high-pressure company. I hope to receive your request soon.

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Question From Faye R on 5/01/2016

Is there a minimum amount of time you have to live in the house before you can apply for a reverse mortgage?

Expert Answer

Hi Faye,

This is not quite as cut and dried a question as it may sound. There is no set period of time that you must occupy a property in order to apply for reverse mortgage loan but there are other considerations. For example, the reverse mortgage lender must be certain that you do occupy the property as your primary residence. If this is a home that you have owned and have not occupied in the past (in other words, there is no history of occupancy even though you've owned the property) but now you do occupy the property after recent move, the lender may want to see verification that this home is now your primary residence.

If you have just sold your primary residence, you moved into a new home and you don't own another home, then occupancy is not typically an issue. Under the circumstances all of your documentation would indicate that you do own and occupy the property in occupancy would not be a question. Just like with forward mortgages, it's really a question of common sense in most instances. The lender will look at the totality of the information and if there are questions that need to be answered they will ask those questions.

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Question From Sandra H. on 4/22/2016

I have clear deed to house on small acreage. No liens, back taxes, etc. However I inherited the house from my mother and my sister has right of first refusal, it's clearly stated on the deed. Can I take out a reverse mortgage on this property?

Expert Answer

Hi Sandra,

I'm sorry but this is one I would have to see the deed and have a review completed to give you a solid answer. I suspect what you're telling me means there is a restriction on the title which would prevent us from being able to do the reverse mortgage but I don't know that for sure. I would have to see the deed and have it reviewed to determine the effect of the right of first refusal. For example, if that verbiage in some way restricts the lender's ability to foreclose on the property in the event of a default then we would not be able to place a reverse mortgage on that piece of property. If it in any way restricted the lender's ability to sell the property it might have the same effect. The only way to know for sure though would be to have the title reviewed.

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Question From Jim B on 4/20/2016

If we use a reverse mortgage for one home and decide to move can we use a second reverse mortgage for the next home providing we payoff the first?

Expert Answer

Hi Jim,

As long as the preceding reverse mortgage has been paid in full with no losses on that loan, you can absolutely get another reverse mortgage loan. In fact, there is no limit to the number of reverse mortgage loans you get as long as you get them one at a time after the previous loan has been paid in full. I wish you the best on your new home let us know if we can help!

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Question From Roger E on 4/19/2016

I am 67 yrs. old. I have a first mortgage of $19,000. I have a second mortgage of $209,000. My house is my primary residence and is worth $280,000. Do I qualify for a reverse mortgage?

Expert Answer

Yes you do qualify for reverse mortgage because the only real qualification based on what you told me so far is your age (other qualification criteria include property type, credit and income). The problem that I think you're going to run into in the real question that you're concerned with is the benefit amount that you will receive the reverse mortgage and whether or not it would pay off your existing liens.

With the amount of your total liens that would have to be paid you would not receive enough money from the reverse mortgage to pay off the existing liens. Therefore you could obtain a reverse mortgage but it would require you to bring in a fairly large amount of cash to close the transaction. Any money you brought in would be to buy down your existing mortgage balances and therefore we go to your equity but the question is whether or not that's feasible or advisable for your circumstances. Pending on where you live and what the costs are for reverse mortgage in your area this amount can change by several thousand dollars (some states such as Texas and Florida have much higher state costs for things like title insurance, mortgage taxes, and intangible taxes).

Your best bet would be to go on to our website and put your information into our calculator for free no obligation quote to see where you're at. That way you would know exactly how much money you could receive in the program, how short that would leave you of being able to pay off your existing liens and whether or not this would work for you.

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Question From Marcia S on 4/06/2016

How long do I have to own my home before I can get a reverse mortgage? Can I make interest only payments on the loan if I want to lower the growing balance? Can I refinance the reverse mortgage loan to pay if off in the future if I feel I don't want it anymore?

Expert Answer

Hi Marcia,

If you acquired your home through a traditional purchase transaction or inherited it from a family member, there is no set timeframe for how long you have to own the property in order to apply for a Reverse Mortgage.  You do however have to be able to show evidence that the property is your primary residence which can take anywhere from 30 to 90 days in order to establish.  If you were deeded the property from another party then you would be looking at 12 months being the requirement for seasoning.

You absolutely can make payments on a Reverse Mortgage Loan.  There is no prepayment penalty on a reverse mortgage so you can make payments of any amount, up to payment in full, without penalty at any time you wish.  This would also include your right to refinance the loan and pay it off at any time you desire.

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Question From Joanna on 4/04/2016

I am on title with my mother on her home. I am under 62 and do not live in the home. We have a lifetime occupancy agreement. Can she get a reverse mortgage as long as I am on title?

Expert Answer

Hi Joanna,

The only way for Mom to get a reverse mortgage at this time would be if you were willing to come off of title long enough for the loan to record, and then she can deed the title back to both of you shortly after the loan closes.  This would protect your title interests but it does not protect you against the loan being called due and payable if something happens to mom so you need to consider this action carefully to be sure it is what you want to do and you are ready for the ramifications.

If mom passes or no longer permanently lives in the home (has to move to a nursing facility), then the loan would become due and payable at that time.  You would be on title so you would have the rights of an owner, but there could be issues with your ability to refinance the house with mom still on title and then there is the manner of title to be concerned with if you have to sell with another owner on title if mom's interest does not revert to you or if she is still living but is incapacitated.  I would encourage you to seek legal advice to be certain that if you choose to go this route, that you have all your ducks in a row so that you are protected in the event something happens to mom and you have to sell or refinance the home.

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Question From Daron on 3/30/2016

I have a client that has a note from a private party that was never recorded. On the prelim there are no liens. Can the client be able to payoff the private individual through the close of escrow?

Expert Answer

Hi Daron,

The lien would have to be recorded and then there would be a one-year waiting period in order to be able to pay it off with HECM proceeds.

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Question From Portia on 3/28/2016

Do all title owners, even those with a remainder interest, have to be over 62?

Expert Answer

Hi Portia,

To be eligible for a reverse mortgage, all owners must be 62 or over.  Any owners not 62 can come off of title and then be re-added after closing but there are risks to this because the loan becomes due and payable when the last borrower on the loan permanently leaves the home.  HUD has provisions in the loan now to protect qualifying under-aged spouses of reverse mortgage borrowers who were non-borrowing spouses at the time the loan was originated, but if the older borrower you reference is not a spouse, these protections are not there.

We do not recommend this action if you are depending on being able to live in the home after the passing of the older spouse and you do not have the wherewithal to refinance the loan into a new loan in your name if you are not the non-borrowing spouse.  Remember, none of us like to think bad thoughts but if something unexpected were to happen suddenly and in the near future, you need to be certain that you have plans in place to be protected.  If you can refinance the loan or plan to sell the property anyway, this might not be a concern but you need to make sure you understand the consequences before you find yourself in a position that you need to make a decision and are not ready for the choices.

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Question From Shirley on 3/28/2016

Why am I allowed only 60% of the value of my home?

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Question From Craig on 3/24/2016

If someone has joint tenant ship (right to survivor) of a home with someone can either one get reverse mortgage without consent from the other

Expert Answer

Hi Craig,

One person cannot solely apply for and place a reverse mortgage on a home that is owned by multiple individuals, regardless of the manner in which title is held.

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Question From Arnold C. on 3/19/2016

Can I be pre-qualified for a reverse mortgage before I pay for a home appraisal? Also, If an appraisal comes in low, how long would it be before it could be re-appraised?

Expert Answer

We do a full qualification with credit and income on every borrower before we order any appraisal. It doesn't take long and it makes no sense to run up your costs if there are potential  problems. 

If the appraisal is not to your liking, we have to wait for 6 months before we can order a new appraisal. HUD does not allow borrowers or lenders to engage in appraisal shopping by allowing them to merely cancel one case number and appraisal and order another. 

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Question From Oliver on 3/17/2016

Can I pay the property insurance and taxes yearly without the lender holding part of the funds in a reverse mortgage for a number of years?

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Question From Nanci S. on 3/09/2016

Are the guidelines for a reverse mortgage the same in every state

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Question From Teresa on 3/01/2016

Hi, how does the reverse mortgage really work? I have been trying to understand it,do I receive the money that is reversed? I pay $ 441.70 for my mortgage and I'm on social security and only make under $760.00 a month and the payments goes to USDA Rural Development and I would like to know how would that work? And how old do you suppose to be? Like to know how this all works?

Expert Answer

Hello Theresa, 

Thank you for your question. I have answered you in a new blog post you can find here

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Question From Andy on 2/27/2016

Can you get a reverse mortgage on a different house in a different state AFTER paying off a previous reverse mortgage? Is there a time limit on doing so?

Expert Answer

Hi Andy,

As long as there is no loss to HUD on the first reverse mortgage and the previous loan is paid in full, there is no limit on the number of reverse mortgages a borrower can get.  You can only have one at a time and it has to be on your principal residence, but HUD will allow you to pay one off and obtain another and there is no time limit required between the two by rule.  But, by practicality and the way the loans work, you may need a couple of days between the two in order for the HUD system to be able to verify the successful payoff of the first loan.

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Question From M on 2/20/2016

Is someone collecting a monthly check from the reverse mortgage company?

Expert Answer

Good afternoon,

There are a number of ways to choose to receive your reverse mortgage proceeds and a monthly check is one of those ways.  Borrowers can choose to take a lump sum of cash, a line of credit that they can access when they choose, a monthly payment for a specified amount and time period (known as a term payment), a guaranteed payment for life (known as a tenure payment) or a combination of the above.  In other words, a borrower could use a portion of the proceeds as a lump sum payment to be taken at closing, set aside a portion of the proceeds to be used as a line of credit when needed and have the remainder of the funds used to send them monthly payments. 

It's entirely their decision and as long as there are still funds available to the borrower, the decision can be changed at any time with the remainder of the funds.  For example, a borrower can go for 5 years with the funds being used as a line of credit and suddenly decide that the monthly payment option would work better in his case.  With a very small change fee, as long as he still has funds available, he can contact the servicer and change the way he receives the remaining payments so that he receives a monthly payment for the rest of his life.  So even if they are not now receiving a monthly payment, they could elect to receive one at a later date.

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Question From Mr. Miller on 2/01/2016

What is the likelihood of the maximum reverse mortgage loan to be raised to more than the current $625,500 limit in the next 12 months or so?

Expert Answer

Hello Mr. Miller,

We have no indication at this time that HUD will raise the limit to anything higher than the $625,500 which is itself a "temporary" increase over the statutory nationwide limit of $417,000.

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Question From Cathy & Dan on 1/29/2016

Are you a family owned company? Do you have a DVD or information packet explaining your Reverse Mortgage Program?

Expert Answer

Hi Cathy and Dan,

Yes we are a family owned company with our senior management having almost 40 years' experience in the mortgage banking industry.  We believe in the reverse mortgage program, so much so that the first loan we originated nearly 10 years ago was for a family member!  Our team was part of the company that developed and introduced the first fixed rate jumbo reverse mortgage to the market in 2008.

We have quite a bit of information available including copyrighted calculators and amortization schedules that we developed to allow borrowers to run their own scenarios which allows them to take charge of their reverse mortgage circumstances as they best suit their needs.  We would love to send you something that would address your individual questions and concerns and will do so without requiring you to make a commitment or give us all your personal information just to get a few questions answered. 

We will not hound you day and night to push you to make a move, even if you aren't ready as some folks have found when they contact some companies.  We believe that this is a great loan product, but it's not right for everyone and only you can make that decision and you don't need us badgering you to do something that doesn't feel right.  We will do everything we can to give you the information you need to make an informed decision and then allow you the space to make that decision. 

If you would like us to send you generic information on the program itself, we would be happy to do so.  If you would like a no hassle, no pressure proposal showing you what options you would have based on your circumstances, we will gladly do that for you as well and then give you the opportunity to digest the information.  We are here to assist and to educate our customers, not to sell them something at all costs.  We believe we have the most favorable reverse mortgage terms and service and we don't need to pressure people to sign quickly before they get a chance to compare.  

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Question From Leslie W. on 12/21/2015

My parents home is in both of their names. My dad has passed away. I have a half brother. Does my mother need our permission before getting a reverse mortgage?

Expert Answer

Hi Leslie,

I can't give you a definitive answer without knowing how they held title or what state they lived in.  What we see most often is that husbands and wives hold title as Joint Tenants which gives rights of survivorship to the remaining spouse.  If that is how they held title and they did not live in a state with specific heirship issues, then it would be easy for mom as she would just have to get an affidavit of death for her husband as the surviving spouse and could then obtain a reverse mortgage.

However, some spouses do choose to take title specifically as Tenants in Common where there is no specific right of survivorship and each owner can will their interest to whomever they wish.  While this is not anywhere near as prevalent, it does happen. 

So what is the bottom line?  I would suggest that you have the title to your mom's home reviewed to see how the title was vested as well as the state restrictions, if any, to see if she needs any further work to do the reverse mortgage if that is her goal.  I'm not an attorney and cannot give legal advice so if there is any question at all about mom's ability to encumber the property at this time with any particular form of financing, it may not be a bad investment to make a quick call to a licensed attorney in the state in which the property is located and make a quick inquiry.  This is something that can be researched and answered very quickly and probably at a very small cost but may save a lot of heartache later.

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Question From Dick on 11/25/2015

Can I pay off the reverse mortgage at any time without a prepayment penalty?

Expert Answer

Hi Dick,

There is never a prepayment penalty so you can pay any amount you wish up to and including payment in full at any time you wish without penalty.  So you can make a small payment, a partial pre-payment or payment in full at any time, whether you sell the home, refinance the loan with other financing or whatever and there will be penalty for paying the loan off early.

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Question From Sue Z. on 11/06/2015

In all cases do you HAVE to be 62 or older , even if one of the owners is under 62 but has become disabled ??? And would there ever be consideration for a reverse mortgage using a pending law suit to help secure payment?

Expert Answer

Hi Sue,

All Reverse Mortgage borrowers under the HUD Home Equity Conversion Mortgage (HECM or "Heck-um") reverse mortgage program must be a minimum of 62 years of age.  There have been proprietary or private programs in the past that have gone down lower in the past (I was involved in creating the first fixed rate program and it went down to the age of 60) but I am not aware of such a program at this time.  HUD does have provisions for spouses when one spouse is 62 or older but the other is not, but even then the spouse who is not yet 62 is not on the reverse mortgage loan and is considered a "non-borrowing spouse" with conditional rights to remain in the home if something happens to the older spouse.  The non-borrowing spouse is not on the loan though and cannot access any of the loan proceeds, even if funds would have still been available in the line of credit to the older spouse.

Disability is not a waiver for the age requirement.  Again, if you say that "one of the owners is under the 62 year old requirement" if the other owner is the spouse and over 62, the older spouse still can still get the reverse mortgage but I urge you to make sure it is the right move for you.  With the new safeguards the younger spouse would not have to leave the home if something happened to the older spouse, but there are still considerations to make before proceeding with this option. 

With regard to the last part of your question, I'm sorry, I am not sure what you mean by using consideration of a pending law suit to help secure payment so I do not know how to answer the question.  I would be happy to answer your question, if I can, if you would like to contact us with a bit more information but I just don't think I have enough information at this point to give you a valid answer.

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Question From Jessica on 10/16/2015

I am a participate of the Florida Housing Finance Corporation Home Investment Partnership Program when I purchased my home back in 2000. I have a first mortgage of $57,900 and a subordinate mortgage of $15,000. The subordinate mortgage shows up as a lien. Can I still do a reverse mortgage or would I have to pay off the subordinate mortgage first in order to do a reverse mortgage? Are there better alternatives? Thank you.

Expert Answer

Hi Jessica,

I'm not familiar with the particular program which you reference and all their rules but I can answer the following.  All liens must be paid in order to get a reverse mortgage.  That would include the first and subordinate liens showing on the property at this time.

Also, many housing and finance programs contain provisions which dictate to whom the property may be sold and some of the selling terms (maximum income, selling price, etc).  If this program places limitations that remain with the property that would affect future sales of the home, it would not be eligible for a reverse mortgage.   Again though, I cannot say whether or not your property has such provisions without an examination of the title restrictions on the property but that is also something to keep in mind.

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Question From Bob C. on 10/04/2015

We have a HELOC currently in use on our home. Can we still apply for a reverse mortgage and use it to pay off the HELOC?

Expert Answer

Hi Bob,

Yes you can but you have to remember two things.  You must pay off and close the loan with the proceeds of the reverse mortgage, you cannot keep the loan open after it is paid to a zero balance. 

Also, HUD recently changed some of the rules of the reverse mortgage program and one of them is that you cannot pay off a loan that was obtained within the last 12 months with reverse mortgage proceeds if that loan was used to withdraw equity from the property and that includes Home Equity Lines of Credit.  In other words, if the loan was not a purchase money loan (it was a refinance or an equity line that was not used to purchase the home) and you drew more than $500 from the home with the loan, you cannot use the reverse mortgage to pay off the loan if it is less than 12 months old.  Borrowers who refinanced a loan but took no money out of the transaction will not be affected by this rule, but if you took out the equity line within the last 12 months and your cumulative draws in that 12 month period exceed $500, the reverse mortgage could not be used to pay the loan off.

Source: New Reverse Mortgage Seasoning Rule Starts 12/15/2014

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Question From R. Ames on 1/11/2015

If I decide on a reverse mortgage with your company. Would you have any objections to my lawyer reviewing the paperwork before signing?

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Question From Karen L. on 8/11/2014

I don't have to pay this back as long as I live in my house or die, right?

Expert Answer

Hi Karen,   You are correct.  There is no repayment required as long as you live in the property and abide by the terms of the loan agreement which include paying the taxes as they come due, maintaining adequate hazard insurance, and keeping the property adequately maintained. 

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Question From Sharon on 8/06/2014

I have been injured by a senior far beyond the amount of their AAA auto insurance . The senior has a reverse mortgage, does that put them in default? if I get a judgement? I am in California.

Expert Answer

Hi Sharon,

I must admit, I'm really not sure where to go with this one.  I'm afraid that any answer I give you to a question like this would be construed as "legal advice" which I am not licensed nor am I qualified to give.  There have also been different reverse mortgages available throughout the years and not knowing what loan this individual has, I could not even render an opinion as to what conditions may appear in the security agreement or the Note and Deed of Trust. 

I can tell you this though.  The Deed of Trust is a recorded document and your attorney can pull a copy from public records and if the loan is the HUD Home Equity Conversion Mortgage (HECM), then it would be easy enough for him or her to get a sample set of the loan documents and then render a legal opinion on this question.  I hope this helps.

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Question From Kerry L on 7/13/2014

My wife and I have a disagreement about the disposition of the Line of Credit on our HECM. She believes that she has been told that any balance remaining on the L of C at time of closing, either by death or other purposes, is lost to the lender as it was part of the original loan. I cannot believe this to be true. I would think it would be used to reduce the final loan payoff. Please give us the facts on this question. Thank you

Expert Answer

Hi Kerry,

If I'm reading your question right, I think I have to disagree with both of you.  I'm not sure what you mean by "lost to the lender" but if you mean forfeited and the lender gets to keep the money from your line, that is not the case.  I can tell you that it does not go toward paying down the principal balance either though.  But I think I can explain this to your satisfaction.

Firstly,  you and your wife have a line of credit that does not accrue any interest until you actually use the money.  In other words, the line of credit is available to you but until you actually borrow the funds, it's like a credit card that you have a $20,000 limit but you only spent $500 on it.  There is nothing to forfeit or pay down with the available credit if you decide to get rid of that card, you just pay off the $500 and you never used the other $19,500 so you just don't have to repay it.  The reverse mortgage line of credit is the same way. 

If you have a line of credit in the amount of $200,000 available to you and something happens to you but you only ever spent $50,000 of the money, then your heirs only have to pay back the amount that you spent plus any interest that accrued on that amount.  Nothing is forfeited to the bank and nothing is credited to the amount owed from the unused line, the line is simply frozen at the amount you used and that is all that must be repaid when your heirs take over the property. 

Remember, you always own the property and then your heirs after you.  All equity in the property always belongs to you or your heirs as you designate.  The bank has no method by which it can just take ownership of the property so you and your heirs always have the choice and decision of what the final disposition will be (i.e. sale of the property, one of the heirs moves in and refinances with a loan of their own, they pay off the loan other funds available to them and keep the home, etc).  Any remaining amount left on the line of credit is just money un-borrowed and therefore not to be repaid.

I hope this clears up the debate but if there is anything else I left out, or if any of this is unclear, please let us know.

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Question From Donna Munday on 5/16/2014

I was wondering about getting a reverse mortgage when I turned 62 in November. The question I have is whether I qualify because even though I have around $175,000 in equity in the house, I owe around 330 thousand dollars in mortgage.the house has a rental home in the back and it is helping me with my mortgage and I am getting SSI disability as well. However it is just not enough to cover my mortgage payment. I am struggling every month so I would think a reverse mortgage would be a good solution for me. But I may not be qualified even know the laws keep changing I don't know where I stand could you please help me with that question thank you Donna Monday

Expert Answer

Hi Donna,

I certainly understand, unfortunately I'm afraid the help I am limited to being able to give you is information about reverse mortgages.  The program currently gives borrowers a little over 50% benefit (52.5%) at age 62 after the last cutback in in September of last year.  After the costs of the loan, even if we could still do the loan without an origination fee as we can now, the amount available to you after the HUD mortgage insurance and third party fees would be just about 50% of the value of the home.  Based on the numbers you have given me ($330,000 mortgage and $175,000 equity), I can assume a value of $505,000.  Based on those assumptions, you would not receive enough money available to you to pay off your existing loan and would have to bring in about $79,000 just to close the reverse mortgage, even with no origination fee at current HUD parameters.

Having said that, I do not know what the lending limits will be in November.  We are currently under a temporary increase in the Lending Limit to $625,500 that has been in effect since 2009 and we have not received word that HUD will extend this increase again this year as of this time.  If they do not, we could revert to the permanent lending limit of $417,000 at the end of September to begin HUD's new fiscal year on October 1, 2014.  If this does happen, then your benefit amount would be based on the value of your property or the HUD lending limit, whichever is less and you would be almost $123,000 short to close a reverse mortgage loan based on a current mortgage owing of $330,000.

The bottom line is that if you do not have $79,000 to bring in to close the loan or possibly $123,000 if the loan limits change by November, then a reverse mortgage may not be the saving grace for which you are hoping.  My recommendation to you would be to contact a HUD approved counseling company in your area now to see what alternatives may be available to you before the time comes when a decision must be made hastily.  There may be other programs of which you are not aware that they can recommend.  I wish I could be of more help but at least you have the information you need to make an informed decision and can plan accordingly.  I wish you the best.

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Question From Donna on 5/13/2014

I will be 62 in November 2014. How soon can I start planning to have a reverse mortgage? I have health issues, & a reverse mortgage would be very useful in keeping me in the home I grew up in. I want to start as soon as possible putting together the paperwork and providing the information needed so that by my birthday I can have the reverse mortgage in place.the co owner of this home has abandoned the property, and he is willing to sign a quit claim right away.

Expert Answer

Hi Donna,

You have a couple of issues you need to address but let's start with the title.  If you have been on title all along, then removing a second party is easy and I would suggest that you do this right now.  If the second party changes his mind later or does not get off of title early enough, it can cause delays not to mention that he would be required later to go through counseling if he is on title at the time you started your application.  It would be much cleaner and easier for all if a Deed could be signed and recorded through a title company now.

Secondly is the timing.  You can begin your application up to 60 days before your 62 birthday.  The counseling can be done at any time, but the certificate is only good for 6 months so I would wait and schedule the counseling session for some time about a week or two before that 60 day period so that you are not in danger of letting your certificate expire in the process.  I would also advise you to contact a seasoned reverse mortgage originator and go through an initial discussion about your property about 3 months before your 62nd birthday.  You can review the current HUD guidelines at that time (HUD is going to roll out the Financial Assessment requirements sometime this summer) as well as this would give the originator a chance to discuss your property and review recent sales in the area.  If you are aware of any deferred maintenance or if there are any other concerns, this gives you both a chance to discuss opportunities, alternatives and requirements before you spend money on an appraisal. 

If there are no issues that would prevent the mortgage, there are plenty of recent sales and everything comes together as it usually does, then you can start your application 60 days prior to your 62nd birthday and close the loan (sign your final loan documents) as soon as you have had your birthday.  There is a 3 day Right of Rescission period that all borrowers who are refinancing their primary residence are given after they sign their loan documents as a final  chance to think about the transaction to decide if they want to cancel.  With the 3 day right of rescission that is required by law, you would not be able to count the day you signed or Sundays or holidays as a rescission day but then you would receive your money after that time period expired and the loan recorded.  It's best to figure about 5 days after signing before you actually have the funds wired to your account.

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Question From carlos on 3/17/2014

Are all reverse mortgages backed by fha?

Expert Answer

Hello Carlos,

NO, not all reverse mortgage programs are part of the HUD Home Equity Conversion Mortgage (HECM or "Heck-um") program.  There have been many proprietary programs that were not affiliated with HUD in any way and did not carry the FHA insurance.  The "jumbo" programs that were once much more readily available were not FHA-insured loans.  FNMA also had a program known as the Homekeeper that they discontinued December 31, 2008 with the signing into law of the Housing and Economic Recovery Act that eliminated county by county limits on the HUD HECM. 

With the meltdown of the mortgage market in 2008/2009, most of the proprietary loans disappeared for a while and the American Recovery and Reinvestment Act of 2009 raised the Maximum Claim Amount on the program to $625,500 for a temporary time period where it still remains today (the permanent maximum is $417,000).  Because the new HUD limits allowed more high dollar properties to utilize the HECM program at lower costs and the market appetite for non-insured product dried up, the HUD HECM became just about the sole product available for several years. 

There are many sources talking again now of the resurgence of proprietary programs but still no new strong programs available in the market.  So while not all reverse mortgages are backed by FHA, the HECM loans are certainly the overwhelming majority of reverse mortgage loans available at this particular time.

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Question From Kathleen on 6/25/2013

We heard that if one member of the couple is 70, the formula changes slightly for the RM...I'm the older one, and I'll be 70 in Sept, my husband will be 67 the same month.

Expert Answer

Hello Kathleen, 

The benefits for a reverse mortgage continue to get larger for each year additional year of age of the borrowers, except when you hit the maximum at 90 years old when you no longer receive any higher benefits for additional years of age.  Up until 90, every year older will raise the benefit to the borrower and if you are within 6 months of your next birthday by the time the loan closes, you will receive the benefit for the next higher age.  In the case of loans with two people, the benefits are determined by the age of the younger borrower.  So in your example above, the benefits will be determined by the younger borrower turning 67, not the borrower turning 70.  If you were closing the loan this month, even though your husband is still 66, you would receive the higher benefit of a 67 year old because his birthday falls within the next 6 months. 

So if I understand your question correctly, there is no magic change to the formula if one or both of the borrowers are 70 years of age that should make borrowers use this age as a benchmark.  The younger spouse would have to be 70 before that age would even drive the benefit calculation.  The calculations do have some "steps" that allow for a slightly larger increases along the way, but the difference for the most part is nominal.  In the case of a 69 or 70 year old borrower, in today's market with an expected rate still below 5%, the difference in the Principal Limit on a $300,000 home would be $1200 in benefits. 

Interest rates affect the amount of money the borrower will receive far more than a year or two of age.  Now that we are very quickly approaching rates that will take us above the HUD floor, in the example I used above ($300,000 home with a 70 year old borrower), an effective rate just .085% above the floor of 5% (less than one eighth of one percent) will cost the borrower over $5,000 in available benefits.  At 5.210% or .210% over the floor, that same borrower would receive over $12,000 less.  If rates rise just another quarter percent, the borrower would receive almost $19,000 less under the program.  So while waiting for several months may get some borrowers a few hundred dollars more in benefits due to age, in times like these with rising interest rates, waiting could end up costing them thousands!

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Question From Carol on 12/13/2012

How do you go about getting a reverse mortgage when you have a contract of deed?

Expert Answer

Hi Carol,

There are many ways to hold title and some allow you to still obtain a reverse mortgage and some do not.  if the property is not fee simple, in other words, you do not own the property outright whether there are liens due to mortgages or not, then HUD will allow lenders to accept some forms of ownership provided the method of ownership extends beyond any timeframe that would endanger the reverse mortgage.  For example, with leased land or a borrower who has a title based on a life estate, the term of the lease or estate must be renewable for 99 years or run at least 50 years beyond the youngest borrower's 150th birthday.

The only way to know if your particular title is or can be made acceptable would be to allow a reverse mortgage lender to review the title from a title report.  They can tell you if your particular method of holding title is acceptable, or can be made acceptable.  We have had some borrowers who have had good luck in renegotiating terms of leases, etc. to enable them to obtain a reverse mortgage and some methods that did not qualify and could not be altered.  You just never know until you try.

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Question From charles ferraro on 11/29/2012

During the life of the loan will we be allowed to make regular monthly payments and additional principal only payments? If there is a balance due when the last survivor passes who is responsible for the sale of the house, family or bank? If there is a balance due in the estate will the family be permitted to make interest only payments until house is sold? Thank You....

Expert Answer

Hi Charles,

There is never a prepayment penalty on a reverse mortgage and so you can make any payments back to the lender at any time you desire without penalty.  The one thing that you must keep in mind is that any payments made will be applied to different portions of the loan in accordance with the Loan Agreement.  This really does not affect the overall balance since all must be paid eventually, but some borrowers think that they want the money they pay to go only toward "interest", etc. for tax purposes but any payments made will be applied in accordance with the Agreement.

As for who "is responsible" to sell the home, the lender and HUD hope that the borrower's heirs will step in and sell the home, keeping any remaining equity.  However, the heirs have the option to decide whether or not they wish to do this.  If there are no heirs or they do not wish to become involved in the selling of the home, then the lender would have to obtain title of the home through a foreclosure action and would then sell the property.  As for paying interest only payments during the sales period, I have not heard of anyone asking a lender if they could do so and I honestly do not know what that would do to the claim of the lender.  That would be a question for the lender/servicer at the time as this could vary from lender to lender and possibly from state to state based on the laws in effect.  Anything that is not specifically spelled out in the mortgage loan documents (the contract with the lender) could change based on changes to the laws or HUD procedures at the time.

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Question From Mr. Gibbons on 9/05/2012

Thank you very much. Just to clarify - if a person had a reverse mortgage for a number of years and the mortgage balance became higher than the property value, I understand that the homeowner would not have to pay the mortgage company the difference. Example - the reverse mortgage balance has reached $350,000 but the home value/sales price is $325,000. The homeowner does not have to pay the $25,000 difference; however, the homeowner has to have assets sufficient to pay the 8% or so seller closing costs? Which would be about $26,000 on a sale of $325,000? Is that correct? If it is correct, the homeowner should technically always have adequate personal reserves to cover such a situation. I assume that that is all covered in the required counseling? Thanks

Expert Answer

That would not be the case.   The reverse mortgage is designed to allow you to live in your home for the rest of your life and not have to make any mortgage payments and it does have the safeguard that when you pass or are forced to permanently leave the home, you and your heirs can never be made to pay more than the home is worth.  However, as I stated in my first response, the reverse mortgage is a lot like every other loan in many respects and this is one of them.  If you choose to sell your home, that is, you make a voluntary decision to move, you would be responsible to pay off the entire mortgage, not just the realtors cost of sale, or there would be possible negative ramifications.

Let me explain.  If you passed while you had a reverse mortgage and the balance exceeded the value and your heirs did not wish to purchase the home, the lender would obtain the home from the heirs through either a Deed in Lieu of Foreclosure or through the Foreclosure process if the heirs were not cooperative or there were no heirs.  There would be no negative impact on the borrower since there are no credit concerns at this point and the lender would not even have any reason to report such a credit incident to a reporting agency due to the passing of the borrower.  However, the loan is meant to allow you to remain in your home for the rest of your life without having to make a payment.  If you choose to leave the home at an earlier time and there is a deficiency balance, it is true that the lender cannot seek judgment against the borrower but they can report the foreclosure on the borrower's credit.  This action would also make the borrower ineligible for any HUD financing in the future until any deficiency had been repaid.

Again, depending on the reason for early departure, this may have no impact on the borrower whatsoever.  Borrowers leaving their home due to the fact that they can no longer care for themselves would not be affected by this as they would not be in the market to purchase again in the future and would no longer have credit concerns.   The loan provides for borrowers to be able to remain in the home no matter how far upside down it may go, so if a borrower simply chooses to move at some point, guaranteeing a loss to HUD's insurance, it's still considered a mortgage default.

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Question From Mr. Gibbons on 9/01/2012

If a senior has a home with a reverse mortgage and for some unforeseen reason needs to sell the property prior to their death or becoming incapacitated, I presume that senior is responsible for the costs associated with selling (i.e. real estate agent commissions, transfer taxes if applicable, etc., etc.) Am I correct in this assumption. I do not have a home with a reverse mortgage now, but am just trying to understand all the implications of one, and I don't immediately find this question answered anywhere, though I may have missed it. Thank you for your help.

Expert Answer

Hello Mr. Gibbons,

In this respect, the reverse mortgage is just a loan like any other loan.  The differences in how you receive your funds and when you must repay them do not affect your homeownership or your property rights or obligations.  You still own your home and are responsible for payment of all property taxes, insurance and maintenance of the home.  If you decide to sell the home and not live in it for the rest of your life as the mortgage allows, you certainly have that option.  You are correct that, just as you would with any other loan, you would be responsible for any costs to sell your home and then the reverse mortgage would be paid from the proceeds of the sale...again, just like any other loan.  You also would then retain all equity in the home.  In other words, if the house sold for $200,000 and the amount owed on the reverse mortgage at the time was $125,000, the $75,000 equity is solely yours. 

You receive a monthly statement with a reverse mortgage just as you would with any other loan.  You can track your loan balance and contrary to what many borrowers believe, while you are never required to make a monthly payment with a reverse mortgage, you have the option to pay any portion at any time to minimize the growing balance if you desire.  Many borrowers do choose to make monthly, quarterly or even annual payments of some amount due to their situation and their goals which is certainly allowable under reverse mortgages (while not required).  Therefore, if your goals are to sell in a set period of time and you wish to keep your balance under a certain level, you can always make provisions in advance to do so, knowing that the equity you retain belongs to you or your heirs. 

So the bottom line is that when considering a reverse mortgage, you can figure future costs of marketing, sales, etc. just as you would if you had any other type of home loan.

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Question From Jack on 7/09/2012

My mother has a reverse mortgage of around $200,00 she took out in January 2008. In July of 2009 an Adjustable Rate Home Equity Conversion Second Mortgage was issued by the FHA for $529,000 . The assessed value at the time by appraisal was $369,000. It also stated that it is due and payable in 2082?? Can you explain this to me? Thanks, - Jack

Expert Answer

Hi Jack,

When a reverse mortgage is closed, there are two Notes and Two Deeds for the loan.  The second being to FHA so that if they ever have to advance any funds to the borrower, they are protected under this Note and Deed.  The amount of the Deeds that were recorded should have been for 150% of the appraised value at the time the loan was placed.  therefore, if the Deed was recorded for $529,000, that would indicate a value of about $352,650 at the time the loan closed.  The reason behind the 150% is that the loan grows over time and therefore, they have to put a higher limit on the recorded loan amount or you mother may lose access to funds she would otherwise have had.  HUD's rules are that no dollar amount is required on the Deed unless it is required by the state and then 150% of the property value is to be used.  Most states do require a dollar amount to be included.

With regard to the date, the loan becomes due and payable when your mom permanently moves out of the home or passes.  Since there is no way to know when that will occur, and the documents require a firm date to be included, the date placed on the documents is 50 years beyond the borrower's 100th birthday. 

But as you noted, just like any other loan, your mom only owes what she borrowed and any fees/interest that accrues on that amount.  So if the balance is $200,000 and your mom wanted to sell her house today, $200,000 is what she would owe.  Also. many reverse mortgage borrowers choose to make some repayments monthly, quarterly or annually to keep their balances lower, even though no monthly payments are required.  We have a calculator on our site that allows borrowers to see how much different payment amounts would affect their balance over time if they would like to run different scenarios.

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Question From Diane on 3/23/2012

We have a Home equity loan. We will not be able to pay off the 1st mtg. and the Home equity from the reverse mtg loan. We asked our 2nd lender if they would subordinate and let us continue paying our home equity loan as we have been doing. They said no because they would be in 3rd place on the loan and they need to be in 2nd place as they are now . Are they confused about this or will they really be in 3rd place on the loan?

Expert Answer

Hi Diane,

We have an article here concerning the fact that there are two Deeds of Trust or Mortgages (depending on the state in which you live) recorded with a reverse mortgage.  In a nutshell, the reason is because money can be advanced by both the lender and HUD on a reverse mortgage and each Deed or Mortgage secures funds advanced by each entity.  Your HELOC lender would be correct that any instrument recorded behind those Deeds/Mortgages would be in third position.

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Question From Anthony on 12/12/2011

My father's reverse mortgage line of credit has more in it than the home is currently worth and he has already taken out of the line of credit more than the home is currently worth. What would be the negative implications if he were to withdraw the lion's share of the line of credit now? Correct me if I'm wrong, but my take on the situation is that it would be the same as if he had sold his house for far more than it's worth and the bank takes that loss. Meanwhile, everything in his personal checking/savings accounts would still belong to his estate. Thank you in advance for any light you can shed on this.

Expert Answer

The Reverse Mortgage is a non-recourse loan. That means that the lender can only look to the property to repay the obligation, regardless of other assets. There is no telling what the value will do between now and the time your father ultimately leaves the property but you are correct in that any money in your father's checking account would not be subject to forfeiture in order to repay the reverse mortgage balance.

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Question From Joel Saliman on 9/15/2011

Can the loan balance grow beyond the value of the house? I thought there was a cap of 60% of the value of the house?

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Question From Maria on 5/22/2011

I will be turning 62 in November. When is the earliest I can start the process to obtain a reverse mortgage? Thanks, -Maria

Expert Answer

Hi Maria, You can begin your application process 60 days before you turn 62 years of age, but you cannot close the loan prior to your 62nd birthday.

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Question From Richard on 2/24/2011

"HECM Saver is available for all HECM transaction types and payment plans..." Source: www.HUD.gov I am looking for a fixed HECM Saver plan with a credit line. Please advise

Expert Answer

What HUD is saying is that the Saver program is available for all transaction types and payment plans - that HUD offers under the Standard HECM programs. The HECM Standard does not currently allow a line of credit on the fixed rate program. Therefore, the Saver program does not allow it either.

The line of credit is an "open-ended" mortgage. In other words, you can continue to go back for multiple draws. The fixed rate currently cannot accommodate an open-ended security instrument. Until such time as the HECM Standard Fixed Rate loan is available as a line of credit, it cannot be offered as a Saver product either. I'm sorry, we would love to be able to offer the line of credit in both Standard and Saver programs as a fixed rate, but it just isn't available.

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Question From Eileen on 2/12/2011

I am a licensed Mortgage Broker and at the request of a friend, I met with his mother. After looking at her situation, I want her to talk to a reverse mortgage specialist in your company. Although there is a company in San Francisco, it looks like there is nothing for town of Alameda. She lives in a luxury home with plenty of equity. Who can I send her and her family to talk to?Her present mortgage situation is draining her retirement savings.

Expert Answer

Please feel free to have her give us a call, our toll-free number is 888-801-2762 or if she wants us to contact her we will be more than happy to do so. We serve many borrowers in the Bay area and have the procedures set up so that she will never have to leave her home. We would be more than happy to see to it that she receives excellent service for the reverse mortgage program which best suits her needs.

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Reverse Mortgages in Plain English
What is a Reverse Mortgage
How a Reverse Mortgage Works
How a Reverse Mortgage Works
How Does a Reverse Mortgage Work
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