A Reverse Mortgage can be an invaluable tool for Seniors. Below are some interesting facts about Reverse Mortgages
Age Requirements: Only one of the two spouses must be over the age of 62 to be eligible for financing.
Eligible Property Types:
Reverse Mortgages are available only on Primary Residences.
Eligible property types include:
– 1 to 4 Family Homes, – Mixed Use Properties (ie. 2 family with a store or office*)
* certain restrictions apply
To be considered a “primary residence” the Senior must occupy the property for at least 181 days during a calendar year.
Eligible Lending Structures:
•Natural Person(s), •Life Estates, •Trusts (Irrevocable & Revocable)
Distribution of Funds:
Proceeds from Reverse Mortgages can be distributed via 3 methods (or any combination).
1) Lump Sum Distribution – This method is best when you intend to use ALL of the proceeds for a specific purpose, such as paying off an existing mortgage or debt.
2) Tenure payments – You can receive a monthly sty-pin for the rest of their lives. This is similar to Social Security payments.
3) Line of Credit – Obtain a Line of Credit that can be drawn on as needed. The Senior only pays interest on the outstanding balance. Typically the minimum draw is $5,000. An additional benefit of the Line of Credit feature is that it grows annually by approximately 4%, which helps keep pace with inflation and enables the Senior to stay in their home longer.
Reverse Mortgages are Non Recourse Loans
Reverse Mortgages are Non-Recourse loans! If the principal balance ever exceeds the fair market value of the home, the Senior or his/her heirs are not responsible pay for any shortfall in value (negative equity). Mortgage Insurance Premium or MIP is collected monthly on each loan and in the event of an equity shortfall; HUD will reimburse the lending institution. The Senior can retain other assets and would not be responsible for any loss to the lending institution.
Reverse Mortgages are backed by HUD and they are Federally insured. There are many safeguards built into Reverse Mortgages. Prior to being able to apply for a loan, the Senior is required to attend Counseling from an Independent HUD Approved Counseling Agency. The counseling must be scheduled in advance and is performed on the phone.
The Senior can have family members and/or trusted advisors on the call. The duration of the call is about 30-45 minutes and it is customized to the Senior’s specific terms and loan request.
Once complete, the Senior will be issued a Counseling Certificate. If they decide to move forward with the application, the Counseling Certificate has to be signed and returned to our office. Only then can we proceed with the application.
In-home Application & Closing….
We realize that as Seniors age, it’s more difficult to travel and get around due to health and mobility issues. Our company offers “Concierge Application & Closing Services” at no additional cost. We will accommodate you by making the process seamless and easy. We will meet you in the comfort of your own home from the initial consultation, application, and even close the loan at the kitchen table. We bring our office to you!