FAQs

Frequently Asked Questions

Here is a list of frequently asked questions so you can start the reverse mortgage process with all the information you need.

If you have additional questions, don’t hesitate to get in touch with us — someone from our professional team will happily assist you!

When I get a reverse mortgage, do I sign my home over to the bank?

No, with a reverse mortgage, you still own your home. Additionally, you are still responsible for taxes and insurance.

What happens to the equity in my home when I take out a reverse mortgage?

A reverse mortgage doesn’t affect home equity any differently than any other type of negatively amortized mortgage.

Since you aren’t making payments, the loan balance will grow through negative amortization; this amount is calculated for you based on your loan amount so that you can understand what each month or year does to your equity.

Additionally, a reverse mortgage will not affect the future equity building in your home over time.

Will my children have to repay the loan?

Reverse mortgages are non-recourse loans.

If the property is sold to pay off the loan when the homeowner passes away or decides to leave the home for any reason, the balance due (up to the sales price of the home) will need to be paid. In the unlikely event that the loan balance is higher than the market value of the home, then any overage due is forgiven and the homeowner and or heirs are not responsible for the overage due.

The maximum loan payoff is the current market value of the property. If the heirs want to keep the home, they must pay the balance, up to the fair market value, in full to the reverse mortgage lender.

Can I get a reverse mortgage if I still have an existing mortgage?

Yes, if you have enough equity, you can still qualify for a reverse mortgage. Some of the proceeds from the reverse mortgage will be used to pay off the existing mortgage.

What if I live longer than expected, can the lender evict me?

No, there is no time frame with a reverse mortgage. You can stay in your home without making payments for the rest of your life.

Do I need good credit?

Reverse mortgage lenders look at your credit, however, they take a “common sense” approach to determining eligibility

Aren’t reverse mortgages expensive?

Many factors go into a reverse mortgage. For example, if you live a long life or your property declines in value, the decision to establish a reverse mortgage could end up being a very good move.

Additionally, if you sell your home and there is equity left after paying it, you can keep it. However, if you owe more than the home is worth, you are not responsible.

The equity in your home can become an income source that will make your life much more comfortable!

What happens if the owner becomes ill and needs to be moved to a senior care facility?

Reverse mortgages are not due and payable until the last surviving borrower dies, sells the home, or does not live there for 12 consecutive months. Just remember that the taxes and insurance always have to be paid, and the property needs to be well maintained.

As long as the owner lives in the home, the loan won’t be affected, and remains in full force and effect.

What demographic of seniors are most likely to get a reverse mortgage?

There isn’t a specific demographic. Seniors choose reverse mortgages for many reasons, including:

Immediate needs, such as paying off their existing mortgage or other debts.
Home improvements.
Medical expenses.
As part of a retirement plan.
To help with long-term care.
To buy or downsize to a new home without a mortgage payment (called a HECM for purchase).

Wouldn’t I be better off selling my home?

Not necessarily. If you sell your home, it may cost you up to 10% of your home’s equity in sales costs alone. After selling, you may have to pay rent or have another monthly payment that eats away at your savings. Additionally, moving can be an overwhelming task for many seniors.

Are all reverse mortgages the same?

While most reverse mortgages are similar, not all lenders are the same. You want to work with a lender who thoroughly understands these types of loans and can go over every option available to you.

A good lender will present the facts and let you decide without added pressure.

Do I have to fix up my home?

No, your home doesn’t have to be in perfect shape. If the lender requires repairs, they can typically be done after closing.

If I elect to receive monthly payments, how soon will I start collecting them?

You will receive your first monthly payments on the first business day of the month following your loan funding date.

Does my home qualify for a reverse mortgage?

Single-family homes, manufactured homes, 2-4 units properties, townhouses, and condominiums are eligible for reverse mortgages. Take into account that co-ops do not qualify at present.

What are the interest rates on a reverse mortgage?

Interest will only be charged on the proceeds you receive. You will be able to choose between fixed and variable interest rates. Additionally, it will not be paid out of your available loan proceeds; it will compound until repayment takes place.

Are the proceeds from a reverse mortgage tax exempt?

Yes, proceeds from a reverse mortgage are tax exempt.