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This rate option will give you access to more cash proceeds over the life of the loan than any other product option available. You will notice that there is a line of credit available after 12 months which will allow you to receive the most money possible in the first 12 months. If your number one goal with the Reverse Mortgage is to get your hands on as much money as possible this is the option for you.

If your priority is to preserve as much equity in your home while still leaving access to a line of credit to have in case of an emergency this is the product you would want to choose. If you review the amortization schedule for this product, you will see that over the years your outstanding loan balance with this selection will be lower than the other product options.

With this product option you will keep your closing costs as low as possible in order to establish your Reverse Mortgage. If you are most concerned with the costs to set up the loan and less concerned with the amount of proceeds you will receive, this is the product I would recommend for you.

As the name indicates this is a Fixed Rate loan option. Your rate would never be subject to change if you choose and close on this product option. This is the option you would select if your biggest priority was to secure a rate that would not be subject to change. Fixed Rate loans are a single disbursement lump sum so there is no option for a credit line. Depending on your individual circumstances, a Fixed Rate loan option may not provide you with as much available loan proceeds as one of the adjustable products so you will want to compare the amount of proceeds available when making your decision.

If your current home value is higher than $1.25 Million, this is a product you will want to look at in comparison to the Government product. The Government Insured Reverse Mortgage has a maximum value currently of $679,650. This means that any additional value above that figure is not factored into the loan amount calculation. Having a value higher than $679,650 does not prohibit you from still considering the Government Product, but at higher home values, this product may provide you with significantly more funds available than the Government Product can. There is no Mortgage Insurance Premium on this product so the closing costs are usually lower for this product in most cases. This is a Fixed Rate product so the proceeds are given as a lump sum only in lieu of the option for a credit line. If you have a larger existing mortgage or are looking to receive additional proceeds above what the Government product can provide, this is the best option to accomplish that goal.

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Great! It looks like your home value estimate is about $~hvalue~. If you feel this estimate is not correct you can manually change it below. If you have an existing mortgage balance I'll need to know the amount we are going to pay off to get rid of that mortgage payment!

I was unable to fetch a home value for the property details given. Please input the value manually below. If you presently have an existing mortgage on your home this info will be needed as well.

About Line of Credit

Your Reverse Mortgage Line of Credit is subject to the Line of Credit Growth calculation. The Line of Credit Growth Rate is the combination of your Initial Loan Rate and the Mortgage Insurance Renewal Rate. The Line of Credit Growth Calculation is based on how much money is available in your Line of Credit that has not yet been advanced. If you advance 100% of the funds in your Line of Credit, there would be no further growth as there would be no remaining funds available in your Line of Credit. Your Line of Credit Growth Rate is variable because the Initial Loan Rate is a variable that is subject to change once per year on an Annual Adjustable Loan.

About Cash at Closing

HUD guidelines limit the amount of money that you are allowed to receive at time of closing and during the first 12 months after the loan has been closed. This dollar amount is how much money would become available to you from the Line of Credit once you reach 12 months from the day your loan closes based on the estimated figures you have provided for this calculator.

About Loan Balance

Your Reverse Mortgage Loan Balance will increase over time as you are not required to make any monthly mortgage payments with a Reverse Mortgage loan. The Interest and Mortgage Insurance Renewal will accumulate based on the outstanding Loan Balance. You can make payments on the Reverse Mortgage to prevent this balance from increasing if you want to, but it is not required. The Reverse Mortgage loan is a Non-Recourse loan which means you cannot owe more than the value of your home.

About Property Value

This calculation is based on the standard HUD disclosure of 4% per year expected property value appreciation. This is not a guarantee of what your home value will be in the future and is just for illustration purposes only. Your Property Value will adjust up or down as the local real estate market conditions dictate.

About Home Equity

Home Equity is the difference of your Property Value minus your Loan Balance. This is also a calculation for illustration purposes only and not a guarantee of what your home equity will be in the future. Your Home Equity will vary depending on how much your Loan Balance becomes compared to what your Property Value is at any given time in the future.

About Existing Mortgage

If your home currently has a mortgage, please specify the full amount balance in the existing mortgage field.

Doc Preparation

This is a 3rd party service selected by the Lender that is responsible for preparing the final closing documents which include the note, deed of trust, agreement, etc. They are responsible for making sure that the documents are in compliance with local and federal guidelines.

Flood Certification

This is a 3rd party service that is responsible for ascertaining whether or not a property is located in a Flood Zone as determined by FEMA and provides a Life of Loan determination/guarantee

Mortgage Insurance Premium or MIP

This is the fee that is paid directly to HUD at closing of the loan to insure the individual loan under the HECM program.

Settlement or Closing Fee

This is a 3rd party service that is responsible for handling the settlement or closing of the loan. They work with the title company to get the public records information, they work with existing lenders to obtain payoffs, coordinate with the lenders for funding and the counties for recording of the loan.

Counseling Fee

This is a 3rd party service that is providing the counseling session to each Reverse Mortgage applicant in the beginning stage of the process. This is a HUD requirement in order to start the Reverse Mortgage process. The counselors are tasked with educating the borrowers about Reverse Mortgages as well as determining if there are any other types of financing they may qualify for.

Appraisal Fee

This is a 3rd party service again as well. The appraisal fee goes to an Appraisal Management Company or AMC. Their responsibility is to assign the appraisal order to a local FHA approved appraiser in the same market area as the property of the Reverse Mortgage borrower and to be the go-between for the Lender and the appraiser to maintain appraiser independence. They also are required to review all appraisals for errors or omissions prior to delivering the report to the Lender.

Credit Report

This is another 3rd party service. The credit company is required to provide a full credit report from all 3 bureaus (Experian, Transunion & Equifax) for each Reverse Mortgage applicant to determine the borrower’s credit scores, credit history and any delinquencies or public record items. This is a necessary step in the process as a Lender must review a borrower’s credit history for specific items to determine eligibility into the program.

Lender’s Title Insurance

This is a 3rd party service that is required for any type of loan that is done and is not specific to Reverse Mortgages. For every loan done, a title report must be obtained from a Title Company and the company has to insure the Lender in the transaction for the required dollar amount based on appraised value, etc. The fee for title insurance usually varies by loan type and from state to state.

Endorsements

Lenders require various different types of endorsements to the title policy based on the type of loan being given. For a Reverse Mortgage, some endorsements that are required are the Neg-Am and Environmental and in order to provide these endorsements to the policy, there are usually additional charges. Other such endorsements that are required can vary based on property type (ex. Condo, PUD, Manufactured Home). The charges for these endorsements will vary from state to state.

Recording Charges Mortgage

Whenever a new loan is completed, the Security Instruments (Deeds of Trust or Mortgage – verbiage varies from state to state) must be recorded with the county recorder’s office to finalize the transaction. There is always a charge to record documents and that is why there is a Recording fee for all loans. Recording charges can vary from County to County and State to State as well.

Notary

All final loan documents must be executed in front of a notary as there are documents that require notarization such as the deed of trust. This is a 3rd party service and is based on the amount that the signing service will charge to handle the signing and notarization of all necessary documents.

Initial Draw From You Credit Line

The quote and pricing terms on this page are based on a max initial lump sum. If you would like to receive a lesser amount at closing than is shown, please enter that amount in the box below and click on calculate

May 15, 2018 By All Reverse Mortgage

40 comments on this article

What is a Reverse Mortgage?

Simply put, a reverse mortgage is just a loan designed for homeowners age 62 and older that provides access to a portion of equity without the burden of taking on monthly mortgage payments.

Like any other mortgage loan, you receive monthly statements showing the amount of interest that accrues, but with the option to defer repayments until the home is sold.

You own the home, not the bank. The reverse mortgage is simply a loan on the property that becomes due when the last borrower on the loan no longer lives in the home. All remaining equity in the home at that time of maturity would belong to the borrower or the borrower’s heirs.

The most common type of reverse mortgage is the HECM, which is the acronym for the Home Equity Conversion Mortgage. This program was created by the Federal Housing Administration in 1988. While a traditional home mortgage requires the homeowner to make scheduled monthly payments over a specified term, (usually 30 years) the reverse mortgage interest is not due until the loan reaches maturity.

As long as you have a good amount of home equity built up, continue living in your home as your primary residence (not leaving for a period longer than 12 consecutive months) and continue paying your property taxes and insurance you can take advantage of the reverse mortgage program.

You own your home, not the bank.

With a reverse mortgage you continue to own your home, paying your property taxes and homeowners insurance just as before. Like any mortgage, you will receive a monthly statement which will outline all interest charges and balance information. The only difference will be the absence of a coupon to return your monthly payment as no payment is necessary.

At anytime you are welcome to repay the interest charges partially or in full without penalty.

You’re in the driver’s seat.

Some believe that once you get a reverse mortgage the bank will eat all of the homes equity leaving your heirs with nothing but a mound of debt. Wrong. While no one can predict your homes appreciation, you can rest assured that your heirs have no recourse to the reverse mortgage you took. You can choose to make voluntary repayments of the mortgage interest in part or full without penalty.

That’s right; you can make payments back on your reverse mortgage. You can also deduct that mortgage interest just as you would a traditional home loan and you can pay off the entire loan at any time with cash, refinancing or selling.

How much can you receive?

Reverse mortgages are available to all US citizens and Permanent Residents age 62 or older with substantial equity in their home. The maximum loan amount you may qualify for is based on the youngest homeowner’s age, current rates, and home value. Because this is a loan based on life expectancy, the amount of funds that may be borrowed starts at roughly 50% of your home value at age 62 and increases slightly for older homeowners.

To receive an instant estimate of your available proceeds try our free calculator.

What about the repayment?

Unless repaid voluntarily, the reverse mortgage is not due until the last surviving borrower passes away or fails to occupy the property as their primary residence. The heirs will have ample time (up to 12 months) to complete a sale or refinance transaction to pay back the balance of the loan.

If your heirs choose not to act, the reverse mortgage lender will have no choice but to foreclose on the home. In the event that the sale of the property does not yield sufficient funds to pay off the balance of the loan, the government insurance that you would have paid for as a part of closing your reverse mortgage loan will cover your estate. The Lender will be reimbursed for any shortfall from the mortgage insurance fund.

Is a Reverse Mortgage right for you?

Anyone who has desires or needs that cannot be met with their current income levels. Reverse mortgages are a great tool to help you stay in the home you love or to simply enhance your retirement years.

Who is it NOT for?

Because there are typical costs associated with setting up a reverse mortgage, (appraisal and origination charges) it is not recommended for people who do not intend to live in their home for a reasonable amount of years to realize its benefits.

What about taxes?

Cash received by any mortgage is not considered income and will not be taxed.

Required HUD counseling

The Federal Housing Administration wants you to fully understand the reverse mortgage and requires that all applicants receive independent 3rd party counseling by phone or in person. Once the counseling is completed you will receive a certificate of completion which is then signed and delivered to your lender of choice.

What about Social Security or Medicare?

Even though reverse mortgages do not affect public benefits such as Social Security and Medicare, the cash proceeds can impact eligibility for those who are receiving “needs based” state or local assistance.

This is not specific to a reverse mortgage but as to any excess funds that could change the qualifications on these types of programs. Like any mortgage it pays to shop around. Compare offers from both banks and brokers alike and don’t be fooled by the common sales pitch “they’re all the same” or “we service our own loans”.

The fact of the matter is ALL reverse mortgages carry the same safeguards, and there is only one federally insured HECM so don’t settle for less money or higher interest charges.

If you’re not quite ready for this step we recommend you requesting your proposal package which will include our professional presentation including your personal loan details, our expert recommendations and important pre-counseling documents.

What are the qualifications?

In 2014 the FHA introduced what’s called “Financial Assessment” to the reverse mortgage program requiring lenders check a borrower’s ability to repay their ongoing obligations such as property taxes and homeowners insurance. If you have had no serious late payments within last 24 months on property charges or other consumer credit and make enough income to reasonably maintain your taxes and insurance you should not have a problem qualifying for the reverse mortgage.

All Reverse Mortgage® is an Award-Winning HUD Approved Direct Lender celebrating over a decade of excellence. If you’re ready to take the next step speak to one of our knowledgeable experts by calling Toll Free (800) 565-1722 – Or try ARLO™, our revolutionary calculator that offers side-by-side program comparisons, real-time interest rates and expert recommendations.

Additional Resources:

Learn How a Reverse Mortgage Works (Updated for 2018)
Reverse Mortgage Pros and Cons- Starting with the Cons
Watch” what is a reverse mortgage” on our YouTube channel.

Post Tags: what is a reverse mortgage

40 Comments on “What is a Reverse Mortgage? Explained in Simple Terms!”

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ARLO™December 16, 2016

Jenna HunterDecember 16, 2016

It was compelling to know that residents age 62 or older with substantial equity in their home qualify for this type of mortgage. I am nowhere near that age of 62, even though I feel like it. I will be sure to keep myself informed and updated!

Reply
ARLO™March 6, 2016

Eric JohnsonMarch 6, 2016

I will be 62 1-17, my wife is 58, we are both retired at present. We own acreage (deed) under an LP where we are both partners and intend to build a home on it. We can pay outright for the home and own 100% equity in house and acreage. My thought is take a reverse mortgage to fund the next 5-10 years of living expense while delaying IRA withdraw and letting it grow and also delay SS until full benefit or wait until 70 to collect. Question if the LP acreage that house will be on is considered together to utilize LP acreage equity and is this a sensible use of the reverse mortgage?

Reply
- ARLO™March 14, 2016
  
  Mike BransonMarch 14, 2016
  
  Hello Eric,
  
  I've gone ahead and answered your question in a new article you can read here: https://reverse.mortgage/property-eligibility-acreage-zoning
  
  Reply
ARLO™December 25, 2014

DannyDecember 25, 2014

In one of the statements above it said that a rm is not recommended for someone who will not live in the house for a number of years, due to costs, in order to benefit properly. What generally is a reasonable amount of years minimum to benefit? My mother probably has five years left (and my father may stay in the house), and my father may have ten years. Thank you.

Reply
- ARLO™December 29, 2014
  
  Mike BransonDecember 29, 2014
  Good Morning,
  We don't recommend a reverse mortgage as a short term or bridge type of financing because all of the costs are typically front end loaded but there are many factors that depend on the individual. Even though HUD has taken steps to lower costs on some of the loans and there are many low cost options available today, we still believe that if the borrowers think that they may want to move in the next 12 - 24 months and do not have a dire need for a reverse mortgage, care should be taken with regards to the terms of the reverse mortgage they choose.
  Firstly, in direct answer to your parents situation. 5 - 10 years is more than ample time to consider a reverse mortgage. We were seeing borrowers considering reverse mortgages at a time when there were no low cost options and the loans were all very expensive and borrowers intended to stay in the properties for no more than 24 months at the longest and maybe less time. For those borrowers we habitually recommended they wait until they made the move they were planning if they could and then use the reverse mortgage on the home they planned to retire to. We had some borrowers who had no choice, it was a reverse mortgage or face loss of the home even if they thought they might move in a shorter time frame and those borrowers had to factor in the costs of the loan with the costs of selling in a bad market (2011, 2012) and many did well be waiting but that was a decision they had to make at the time and no one can tell the future.
  Now we have lower MIP payments available when borrowers are not using more than 60% of the funds available to them and typically lower lender fees available at this time when they do have to use most or all their funds. Either way,
  on many of the reverse mortgage loans closing today and therefore even though these costs are still front-loaded, many borrowers have the opportunity to use the reverse mortgage as an even greater tool today due to those decreased costs.
  Reply
ARLO™April 20, 2014

lydia GApril 20, 2014

death do us part meaning the house and me

Reply
ARLO™April 20, 2014

lydia GApril 20, 2014

Happy Easter,
question my sister and I are heirs of 2 acres of property with a home on it the home was given to both of us but the property was split one acre for her and one for me. the home sits on my acre I will soon be 62 she will soon be 70 will I be able to receive a RM on the home she has agreed to let it be done because I live in the home and plan to stay in it until death do us part

Reply
- ARLO™April 22, 2014
  
  Mike BransonApril 22, 2014
  
  Hi Lydia,
  The short answer is probably yes but, I have to be honest with you in that the property and the transaction must meet HUD's guidelines. I'm not sure what you mean by "split one acre for her and one for me". Has the property gone through an official lot split so that there are two separate parcels now or is it one parcel with the two of you each owning a portion of the entire piece of land? There would be different steps involved depending on the circumstances.
  If there are two separate parcels where your parcel is completely separate with its own legal description containing only your acre of land, with just you on title and there are comparable sales in the area with similar sized lots then there should be no issues with the reverse mortgage in just your name on your parcel. The lot split could in no way adversely affect the marketability of the home (there could be no easements created that split the lot in half, the lot could not become land-locked, etc.) In this case you would be the only individual on title to your parcel though and would not require your sister's approval so I suspect this is not the case based on your comments.
  If you mean by your sister is "allowing" you to do the reverse mortgage that the lot is staying intact as the two acre parcel, then there are a couple of other concerns. Firstly, if your sister is living with you (and it doesn't sound like she is), she would also have to be on the loan and no additional title work other than for any other loan would need to be completed if you are both on title to the property now. If you are both on title now but your sister does not or will not be occupying the property, then she would have to deed her interest in the property to you. All owners of the property would have to be occupants of the home and on the loan to be eligible for the reverse mortgage. She could not remain on title and not occupy the property and still have the loan go through.
  Now I have to also give you a little more food for thought. I am not a tax attorney and I cannot tell from your email from which state you are writing, but I would also suggest that you contact an attorney who specializes in property transfers and taxation in the area before you determine how you are going to proceed. Some states allow a transfer and as long as the transfer value is marked 0 value on the Deed and that it is an interfamily transfer it will not trigger a taxable event. Some states are considering that a "gift" or secondary transfer after the inheritance and will levy a tax and possibly raise future taxes. Some states require that you verify heirship through affidavits before a transfer may occur. The time and cost of the attorney is extremely valuable considering it may save you from a very costly mistake if you don't handle the transfer correctly.
  I wish you the best.
  
  Reply
ARLO™August 10, 2013

steveAugust 10, 2013

I purchased my home with a via loan,so naturally the home is under my name.if I had a reverse mortgage on my home at the time I passed away,would my wife be treated as an heir and need to sell the home?

Reply
- ARLO™August 28, 2013
  
  Mike BransonAugust 28, 2013
  
  Hi Steve,
  If you had a reverse mortgage with just you on title and on the loan and then you passed away, the loan would become due and payable at that time and if your wife was your heir, your wife would still own the property but she would have to secure financing in her name at that time or sell the home. This is why we do not recommend married couples leave one spouse off title to obtain a reverse mortgage. When a spouse passes, that is a difficult enough time in your life and you don't need to have to start worrying about where you are going to live as well if you do not have other plans already in place.
  
  Reply
ARLO™July 8, 2013

Sally KellerJuly 8, 2013

My husband abd I would like to know if we should go live with my step dad, rent free, juat pay our bills. He has a nice 2 bedroom trailer ( for us-all new) and the main house which is brick, but sadly not kept up to par-as he was taking care of my Mom for 4 years as she was sick. They have a reverse morgage of now-going up each month- of about 170,000. The property is worth about 275,000. It is 110 acres, with a new barn cost $25,000. He cant just split it and give us some of the land and the trailer or it must go all as one piece? We want to live there but it seems like we may never pay off the reverse morgage and if we do, is the property now worth it. My step dad is 70. we are 58 and 56. Is it worthwhile to live there and save money until he passes they move or try to keep the place- confused really -many, many thanks

Reply
- ARLO™July 11, 2013
  
  Mike BransonJuly 11, 2013
  
  Hi Sally,
  I can't possibly advise you on whether or not you should go live with your father, that is a call you would have to make. I can tell you that whether you go live there or not, your dad will be able to live in the home for the rest of his life and then when he permanently leave the home (either from his death or if he had to go to an assisted living facility), the loan would then become due and payable. If you are his heirs, then you would have to option of keeping the home or selling the home at that time but if you choose to keep the property, you would have to be able to pay off the existing loan with either money you have available to you or be able to qualify for a new loan in your names at that time. Otherwise, you would have to sell the property at that time. You don't have to "buy the property" from the lender if you are your dad's heir, you would already own the property.
  You just need to keep these things in mind and plan accordingly whether you choose to move there or not if you are the heir and will be the owner of the property one day. It might make a difference as to how you prepare for ownership and loan payoff.
  
  Reply
ARLO™June 2, 2013

daveJune 2, 2013

Reverse mortgages, or Home Equity Conversion Mortgages (HECM), are available to homeowners who are at least 62 years old. The loan taps your home's equity, and the bank gives you the money either as a lump sum, a line of credit, or a monthly draw.

You still pay for property taxes, insurance and the costs of maintaining the home. The lender can foreclose if you don't. Also, because interest accrues over the life of the loan, your debt can ultimately exceed the value of your home.

You don't make monthly payments, but if you sell the house or move out for more than a year, the loan is due and the income stops. If the house is sold upon your death, proceeds go to pay the loan.

Reply
ARLO™May 30, 2013

Pete BuongiornoMay 30, 2013

The loan amount on my home is higher that the value of the house. I am ready to move and leave the house. What do I have to do before I move? Do I call Wells Fargo and just give them the deed and is there any fees that I should be concerned about?
Also does turning over the house, take time to do?

Thank you
Pete Buongiorno

Reply
- ARLO™June 14, 2013
  
  Mike BransonJune 14, 2013
  
  Hi Pete,
  If you have the HUD HECM loan, the loan is a non-recourse loan and there would not be any fees to leave the home. You should contact the servicing agent and let them know that you plan to move out and that you want to work with them to make the transfer to them smooth and easy and I am sure they will work with you to do so. they would rather not take the house and would rather the house be sold, but if that can't be done, it is much easier for them to work with you on obtaining a Deed than to go through a lengthy foreclosure. I wish you the best.
  
  Reply
ARLO™April 24, 2013

Walter GaluskaApril 24, 2013

What does it mean when you say, Instead of the mortgage going down it will go up with a Reverse Mortgage?

Reply
- ARLO™April 24, 2013
  
  Mike BransonApril 24, 2013
  
  Hi Walter,
  We're simply referring to the principal balance (the amount you owe) on the loan. With a reverse mortgage, the amount you owe increases over time since you make no payments and the interest accrues whereas on a typical standard or forward mortgage, you pay a monthly payment that pays the interest that accrues and usually a portion of the principal balance so that the balance goes down until the loan is paid in full within a set amortization period (30 years being the most common).
  
  Reply
ARLO™April 19, 2013

Jack DubrayApril 19, 2013

In order can make an inform decision, need to know how the financial institutions fund these type of transactions. Someone have to fund them because no one will keep the paper on the books without getting pay. Even though are guarantee by Feds, from were the monies come?

Reply
- ARLO™April 19, 2013
  
  Mike BransonApril 19, 2013
  
  Good Afternoon Jack,
  Reverse mortgages are just like most forward or traditional loans in this regard. Very few loans these days are made from a lenders' own funds to remain outstanding for the term of the loan.
  Lenders fund loans with a warehouse line of credit and then sell that loan in the secondary market, reverse mortgages included. The loans are sold in securities which in turn replaces the lenders' funds and allows them to remain liquid and to keep making loans. The securities are sold with the lender retaining the servicing rights since the investors who ultimately purchase the securities do not collect payments on forward loans, or make disbursements on reverse mortgages (in addition to all the other duties of a servicer that I won't go into here). Without having an avenue to sell the loans into the secondary market, lenders would not have a flow of cash available to continue to keep making loans.
  
  Reply
ARLO™February 27, 2013

NicoleFebruary 27, 2013

My parents have been trying to do a home modification for the last year and a half. Are they eligible for a reverse mortgage even if they still owe on there property.

Reply
- ARLO™February 27, 2013
  
  Mike BransonFebruary 27, 2013
  
  Hi Nicole,
  The reverse mortgage can be done on properties with or without a current mortgage. The thing you have to remember is that all loans and liens currently on the property must be paid in full, either by the reverse mortgage or by the reverse mortgage and additional cash the borrowers have available to them if the proceeds of the reverse mortgage are not adequate to pay the current mortgage(s) in full. In any case, all current loans must be paid off so the best thing to do is to give us a call and determine the benefit amount to see if that will work with your lien situation. You can also check qualifications here at allrmc.com with our free calculator.
  
  Reply
ARLO™January 28, 2013

Phil LevineJanuary 28, 2013

I'm 69 years old and have owned my own small business for 20 years. I have no interest in retiring. But I do not as yet own my own home. I owned a co op in NYC for 12 years and sold it a while back to move in with my girlfriend. I am planning to move out in a few months and am considering buying a condo or apartment in NJ. I understand that there are times when a reverse mortgage can be attained by someone like me - who does not yet have a home. I have excellent credit and no debt.

Reply
- ARLO™January 28, 2013
  
  Mike BransonJanuary 28, 2013
  
  Hi Phil,
  The reverse mortgage for purchase program may be exactly what you need. If you can still qualify conventionally then you would not have to put as much money down, but then you would also have a monthly mortgage payment. If you do choose to go the route of the reverse mortgage, just remember that if you wish to buy a condominium, the project must be approved by HUD and many are not. In fact, many do not meet HUD's requirements and not only are not approved, but CANNOT be approved.
  Getting a project approved can take many weeks and then you may find out that it does not meet the requirements and if that is the determination, you would not be able to even place a reverse mortgage within that project. Sellers do not like to wait for 6 - 8 weeks only to find out that your financing cannot be approved and most borrowers do not have a clause in their contract that allows them to get their deposit back after waiting so long to find out that the financing cannot be approved. Therefore, it's important to know that it will work before you make the offer.
  
  Reply
ARLO™January 27, 2013

MariJanuary 27, 2013

I am wondering if wells fargo still continues to have reverse mortgage program if so I also have few other question (1)my father is 71 my mother is 61 she will be 62 next year my father is going to dialysis for his kidneys will this affect his medical? (2)he is retired my mother is his caregiver but both cant afford there mortgage they tried to modify there mortgage and were denied the first time they are trying once again can they still ask for reverse mortgage at this time?Also approximately how long will this take?

Reply
- ARLO™January 28, 2013
  
  Mike BransonJanuary 28, 2013
  
  Hi Mari,
  You have several different issues here. The first answer is that Wells Fargo is no longer in the reverse mortgage business. Whether or not they ever have plans to return, only they can say. Secondly, all borrowers on a reverse mortgage must be a minimum of 62 years of age. Your mother cannot get a reverse mortgage until that time. Once she turns 62, the entire process can be completed in about 30 - 45 days from the date the lender receives all the signed applications back as long as your parents have completed their counseling before that time (no work can begin on the reverse mortgage until the borrowers have been counseled). There are things that can slow down this process such as clouds on title that must be resolved, appraisal or property issues, etc., but most loans are completed in a timely manner. Borrowers can speed up the process if that is their goal by having their counseling completed before their 62 birthday and be ready when the time comes (it does not pay to receive the counseling too early though as the certificate is only valid for 6 months).
  
  Reply
ARLO™December 21, 2012

B. GreenDecember 21, 2012

My husband will be 62 in June and I am 10 years younger than he is. If he qualifies for a reverse mortgage and then proceeds me in death, am I considered an heir or does the reverse mortgage continue. (I will be part of the mortgage after a quit claim deed) Do I have to wait until I am 62?

Reply
- ARLO™December 24, 2012
  
  Mike BransonDecember 24, 2012
  
  The only way that you can get a reverse mortgage at this time is if he applies for the loan on his own and that would mean you would have to quit-claim off of the title since the minimum age for all borrowers on a reverse mortgage is 62. You would still be his heir and would still inherit the property, but this is something we do not recommend lightly.
  Because the loan becomes due and payable when the last borrower on the loan permanently leaves the home or passes, you would not be on title and not on the loan, so if you are not ready to move when this event occurs and you do not have other provisions in place beforehand to provide for this, it could create extreme hardships on you at the worst possible time. Some provisions borrowers have informed us of that worked for them is an insurance policy that paid the mortgage off when the older borrower passed; a second property that the borrowers owned that the spouse intended to occupy after the passing of the older borrower anyway; and also the plans that the younger spouse fully intended to move to another state to be with family if and when the older spouse was no longer living anyway. Absent a clear alternative such as one of these, it would be very sad for you as the spouse of a reverse mortgage borrower to be uprooted from your home at the worst possible time if that was not in the plans simply because the loan was now being called due and payable with the passing of the borrower and you did not have the means to refinance the loan in your own name at that time.
  We urge you to think very hard and long and to consult with financial planning professionals before removing a spouse from title just to complete the reverse mortgage request to be certain this is the correct action for your circumstances. You could obtain a reverse mortgage in both your names as soon as both borrowers are 62 years of age. I realize that is 10 years out for the two of you so I would counsel that you either make solid plans that would protect you if anything were to happen to your spouse before considering the reverse mortgage or waiting until you can both go on the loan.
  Feel free to call me at (800) 565-1722 and please read the following post "Reverse Mortgage with Spouse Under 62 Leaves Vulnerability"
  
  Reply
ARLO™October 26, 2012

omar artaleOctober 26, 2012

I would like to know if I could do a reverse mortgage. My property has an actual value of $225,000 and my first and only mortgage is $225,000. Can I do a reverse mortgage without any equity in my house? Me and my wife are both 68 years old.

Reply
- ARLO™October 31, 2012
  
  Mike BransonOctober 31, 2012
  
  Hello Omar,
  Due to the fact that reverse mortgages require no payments and as the interest accrues the balance rises, the loans do require you to have equity in the property when you begin the loan. We have a calculator here that will allow you to see for how much money you would quality for. Once you know how much you can get, you can approach your current lender to see if there are any options available for you. We have had some borrowers who were successful in getting lenders to accept a payment in full for less than the full balance due and as such, were able to replace their current loan with a reverse mortgage and live monthly payment-free. I do not know if this would work for you, but it couldn't hurt to contact them.
  
  Reply
ARLO™October 14, 2012

Terry K.October 14, 2012

Thank you for this article. I have questions. My home is currently held in a LIVING REVOCABLE TRUST in which I am the trustee. I also have a will. I set up my affairs this way to avoid probate for my beneficiaries. Question #1: Can I obtain a reverse mortgage if I hold ownership of my home in this type of trust? I am retired and purchased a modest $200,000 home. I am sure it has lost some value in this down economy. I have $40,000 left to pay on my mortgage. It is my understanding that I can obtain a reverse mortgage with an existing mortgage. Question #2: Is there a general percentage of my mortgage that needs to be paid off to qualify as having "substantial equity" in my home and thus qualify for a reverse mortgage? Assuming my understanding is correct, Question #3: Can I obtain a reverse mortgage with an existing traditional mortgage on my home, or do I have to pay off my $40,000 mortgage with the funds from the reverse mortgage? Stated differently, what happens to my existing mortgage if I qualify for a reverse mortgage? Lastly, the article mentioned that my heirs/beneficiaries will have ample time ("up to 12 months") to decide how to pay back the reverse mortgage loan. I have an adult child that resides with me. He has promised to live and care for me until my death. I do not want him thrown out of the house upon my death as a result of a mortgage of any kind (traditional or reverse) without some time for him to plan how to pay back the loan. Questions #4: During the ample time referenced in the article before a foreclosure is sought by the lender, are fees, charges and/or interest accuring that are added to the reverse mortgage loan repayment amount? Sorry for all the questions. I need to get clarity before calling.

Reply
- ARLO™October 23, 2012
  
  Mike BransonOctober 23, 2012
  
  Hi Terry,
  Yes, a trust is acceptable. The lender will review the trust to be certain that it meets HUD guidelines but most do. The things they check for are in the borrower's interests and most attorneys make certain they are included. Depending on the current value of the home, there is no problem with an existing mortgage. Your existing mortgage would have to be paid in full from the reverse mortgage proceeds.
  Terry, I'm glad you asked the question about the repayment. The lender and HUD work with families as long as they see that the family member is taking adequate steps to either pay off the mortgage or sell the home. This is very important when you have family who are still living in the property. HUD and lenders have seen circumstances in the past where remaining family members really didn't want to leave the home and therefore, made no efforts to repay the mortgage or sell the home. In these cases, the properties may not have been listed in a timely manner, listed at prices above current market or when inspected, were not in "show condition" which meant that no buyer would probably be interested in purchasing the property the way it was being represented.
  If the family members are doing everything the lender or HUD could do to sell the home, then the lender and HUD have no desire to step in, incur the costs and labor to do the exact same things already being done. If the house is being priced competitively, and marketed well, nothing is gained by taking the home through foreclosure and having it off the market or falling into decay while that happens. Remember, foreclosure itself takes many months in most states so if there is nothing to be gained, the lender and HUD do not desire this route. Communication is key and as long as your heir works with the lender, they will continue to work with him unless it got to a point where after that 12 month period they felt a price reduction was in order and your heir refused. At that, if they deemed they needed to begin foreclosure, you still have the time frame needed to complete that process and as stated, this alone can take many months.
  He should have a plan going in as to what he wants to do when the time comes. If he plans to pay the loan off, then he will need to have financing available so he would need to know he can qualify for a mortgage of his own at the time (or a reverse mortgage if he is 62 or older and there is still sufficient equity in the home). His advance planning will be his biggest advantage so that he is not left unaware at the time when he has to start making decisions.
  
  Reply
ARLO™September 20, 2012

CarolSeptember 20, 2012

I thought a reverse mortage was when the bank gives you money for the value of your home, and you can live in your home, however when you die the bank takes your home and sells it, am I wrong?

Reply
- ARLO™September 20, 2012
  
  Mike BransonSeptember 20, 2012
  
  Hi Carol,
  Many people mistake reverse mortgages for a "transfer" of the home from the borrower to the bank. This is not the intent or the way the loan works. You always own your home, you are responsible for the payment of the taxes and insurance and for the maintenance on the home, just like with any other mortgage or home loan. The difference is that you make no monthly payments on the mortgage so instead of your balance going down as you make payments as is the case with a traditional or forward mortgage, the balance on a reverse mortgage goes up.
  There are a number of ways to receive your money and for a complete explanation of the program, I would suggest calling us (800) 565-1722 or read more at our FAQ section.
  
  Reply
ARLO™September 20, 2012

Jimmy DaleSeptember 20, 2012

Im kind of confused on the term *heirs* would that mean like your children or grandchildren or does that mean suriving spouse provided one passed before the other?

Reply
- ARLO™September 20, 2012
  
  Mike BransonSeptember 20, 2012
  
  Heirs can be all of the above. If your surviving spouse is also on the reverse mortgage, they may be your heir for some other parts of your estate, but they are still the owner of the property. The reverse mortgage would remain intact so long as any of the original borrowers remain living in the property. For purposes of the reverse mortgage, a surviving spouse is not an "heir", they are an original borrower/owner if they were on the title and loan when it was originally done.
  
  Reply
ARLO™April 23, 2012

Robert S.April 23, 2012

Great explanation in layman's terms of what reverse mortgages are. I found this article helpful in my research and will be in contact after my counseling session is completed. Thanks -Bob

Reply
ARLO™April 17, 2012

ElizabethApril 17, 2012

Once the family member dies does the Reverse Mortgage keep all contents in the house or can the remaining family members left remove the furniture out of the house etc before the Reverse Mortgage company claim the property back?

Reply
- ARLO™April 20, 2012
  
  adminApril 20, 2012
  
  Hi Elizabeth,
  
  The reverse mortgage company does not "own" the house at the time the borrower passes. The loan becomes due and payable and it is up to the borrower's heirs to determine how they want to accomplish this. They can choose to sell the home and repay the loan, refinance the loan in their own name(s) or they can pay the loan off with other funds available to them. The lender does not own the property at this time and they do not own any personal property inside, it still belongs to the heirs of the borrower.
  
  Also, since the loan is a non-recourse loan, the lender can never seek repayment from any other assets to repay the loan. In other words, if the borrowers received all the funds before the prices of homes fell so dramatically in most areas of the country and lived there for many years without having to make payments, all the while accruing interest and now upon passing the property is not worth as much as is owed on the reverse mortgage, the heirs have the option to choose to either repay the obligation at 95% of the current appraised value or simply allow the lender to take the property to repay the obligation. Regardless of which option they choose, they still have the right to all the borrower's personal belongings and, as stated, the lender cannot seek repayment from any other assets other than the property itself.
  
  Reply
ARLO™April 16, 2012

Robin Adair LoganApril 16, 2012

Does a reverse mortgage give you all the money your house qualifies for up front? Let's say the house appraisal is $280,000 and the qualifying amount of the reverse mortgage is $175,000; does the home owner get a check for $175,000? Or is it parceled out in monthly payments?

Reply
- ARLO™April 16, 2012
  
  adminApril 16, 2012
  
  Hi Robin,
  That's one of the great things about a reverse mortgage, there are a number of ways you can choose to take the money. If your benefit amount is $175,000 and you have no liens on the property, then the next choice you need to make is whether you want the fixed rate or the adjustable rate option. This is one thing that would determine how you would receive the funds.
  The fixed rate loan is a "closed-ended" instrument which means that you can only take one draw and that occurs at funding. So if you absolutely want the fixed rate loan, then you would have to take all the money as just a one-time payment. However, the adjustable rate loan has several options available for you to receive your funds. You can choose the same lump sum payment, you can choose to receive monthly payments, you can leave the money in a line of credit that you can access whenever you want or you could choose to take a combination of all the above (i.e. take $50,000 at close to pay off some debts and make home repairs, put $50,000 aside in a line of credit to be used whenever you want and then have the lender use the remaining $75,000 as monthly payments for life).
  The choice is yours and the funds can be taken based on your needs and desires and which program you choose. But you do have to remember that your choice will be limited to the lump-sum distribution if you decide you want just the fixed rate option.
  
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What is a Reverse Mortgage? Explained in Simple Terms

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