Frequently Asked Questions
“What is a Reverse Mortgage?”
The Reverse Mortgage and Home Equity Conversion Mortgage (HECM) are loans that allow homeowners 55 and older to access the value of their homes’ equity without the obligatory monthly mortgage payment.
What is the Difference Between a Reverse Mortgage and a HECM?
The Home Equity Conversion Mortgage is only available for homeowners 62+. It is FHA-insured, the borrower’s credit score is replaced with a more flexible financial assessment, has non-borrowing spouse protections, can include Manufactured Homes on private land. Meanwhile, the maximum claim amount is $1,249,125.
A Reverse Mortgage is the blanket term that includes other proprietary loans from specific Lenders. Lenders, seeing the benefits of a HECM, designed loans for homeowners who are 55+. They accommodate 600+ FICO scores, offer both fixed- and adjustable-rate options, highlight maximum loan amounts of $4m, and offer 1st and 2nd liens. Although these Reverse Mortgages have tighter requirements, the closing costs are less than a HECM and continue to provide the “non-recourse” feature, which means your heirs will never owe more than the house is worth.
“What Does HECM Stand For?”
HECM stands for Home Equity Conversion Mortgage, and is the only type of Reverse Mortgage insured by the Federal Housing Administration.
“Who is Eligible for a Reverse Mortgage?”
Homeowners at least 55 years old, with significant equity in their primary residence. Depending on the loan itself, a homeowner may have a financial assessment instead of a FICO score. There are minimum income requirements, which guarantee one’s basic needs can be met, including Property Taxes and Insurance premium. Bankruptcy and Foreclosure need to be at least 3 years in the past. In general, mortgage, insurance, and property tax payments must be current and without any lates in last 12 months. However, there may be exceptions depending upon the Lender we use.
“What can I spend the Cash for?”
This is one of the most common concerns in the entire reverse mortgage FAQ. The answer is “Almost anything.” Once the previous mortgage is paid, you can use the money to pay off debts or medical expenses, home renovations, once-in-a-lifetime vacations, savings—almost anything you want! Contractually, a borrower cannot invest in an annuity or in the stock market, but everything else is viable.
“Do Both Spouses Need to be 55?”
No. The older homeowner needs to be 55, and loan proceeds are based on the younger homeowner’s age.
“I Still Have a Mortgage. Can I Take Out a Reverse Mortgage?”
Absolutely—the existing mortgage is paid in full, and then you receive any remaining cash. If you still want to make monthly mortgage payments, they are voluntary at this point. As the homeowner, you’re still responsible for insurance, property taxes, and maintaining the property. There are some Reverse Mortgages that include a Life Expectancy Set Aside (LESA) that can pay your taxes and insurance for you.
“Do Some Homes Not Qualify for a Reverse Mortgage?”
Vacation homes, secondary residences, and primary residences that include four or more rental units do not qualify for a Reverse Mortgage. For other refinancing options for these properties, please call us directly (760) 579-9519.
“What are the Closing Costs?”
Although most costs are financed as part of the loan, you will pay your counseling fee ($150-300) at your appointment time, and you may need pay for your appraisal. If you need help paying for your appraisal, we may be able to help.
“How is the Loan Repaid?”
When the loan comes due, you (or your estate or heirs) will have a few options. Most often, the house is sold on the market, just like any other home would be, and proceeds go toward paying off the loan. Any difference in proceeds will remain with your estate. If the loan amount has surpassed the market of your home, your heirs can simply hand the Lender the keys and walk away.
“What if I Owe More than the House is Worth?”
All Reverse Mortgages offered by Bless this Address are non-recourse loans, meaning you, the homeowner, will never owe more than the house is worth. The Federal Housing Administration (FHA) insures all HECM loans; Mortgage Insurance is included in the closing costs. Meanwhile, the Lender’s proprietary loans also guarantee the non-recourse feature. The Homeowner (and your heirs or estate) will never owe more on the home.
“When does the Loan Come Due?”
The loan is due and payable within 6 months after the last remaining homeowner sells the property, permanently leaves the home, or passes away. HECM loans and some Lender’s loan will grant an additional 6 months when submitted in writing.
“What’s the Fine Print?”
- A homeowner must be at least age 55 to be eligible for a Reverse Mortgage.
- Not everyone will qualify.
- Property Taxes and Insurance Premiums must be paid on time or the loan will be called due.
- Property must meet and maintain minimum safety standards or the loan will be called due.
“Why Doesn’t Everyone Do This?”
Great question! There are a few reasons. Primarily, the Reverse Mortgage concept is a major paradigm shift from the traditional 30-year mortgage: regular mortgage payments, the occasional refinance when interest rates are low, pay off the mortgage by the time you retire; This traditional forward-mortgage model is unattainable for some homeowners now faced with early retirement or rising costs. Secondly, homeowners are so ingrained to the “monthly mortgage payment” that thinking about their future without one is… mind-blowing. Finally, some homeowners want to leave their house, fully-paid for, to their children. Often, these adult children (with children of their own) would rather know mom and dad don’t have to struggle anymore and can now live happily ever after! If you do need the house fully-paid for your heirs, and need funds now for upgrades, costs, etc. we can still collaborate about how the Reverse Mortgage balance would be paid off.