Reverse Mortgage Fast Facts
How does a reverse mortgage work? Key facts of a reverse
mortgage programs are summarized below:
- What is a reverse mortgage? A reverse mortgage is a unique financial tool which enables homeowners, age 62 and older, to tap into their home’s equity and receive a monthly income, lump sum of cash or a line of credit. There are no income or credit qualifications and there is no repayment until the homeowner permanently leaves the home. The borrower retains full ownership of the property.
- Qualifications: Applicants must be at least 62 years of age and own their home. In many cases borrowers use the reverse mortgage to pay off existing liens or mortgages, which eliminates their monthly payments. Borrowers must also live in their home as their primary residence, which means they cannot live elsewhere for more than 365 consecutive days.
- Determination of Loan Amount: The loan amount is based on the home value or the county limit, whichever is less, the youngest age of the homeowners, and the current expected interest rate. This can be determined using a reverse mortgage calculator or by requesting a free no obligation analysis from Kaye Financial 866-894-5829.
- Counseling: All borrowers are required to receive counseling from a third party counseling agency. The counseling must be completed and counseling certificate must be signed and received by the lender before the processing of an application can begin. Call Money Management International (MMI) at 877-908-2227 for an appointment.
- Payment Plans: Reverse mortgage borrowers can choose from several payment plan options:
Tenure: Borrower receives a monthly check for as long as they live in the home.
Term: Borrower receives a monthly check for a specified time period.
Line of Credit: Borrower can establish a line of credit equal to the principal limit.
Lump Sum: A lump sum of cash paid to borrower at closing.
Modified Tenure: Any combination of the above options.
Modified Term: A term plan combined with a line of credit.
- Processing Time: On average, it takes 4-5 weeks to process a reverse mortgage with Kaye Financial, one of the best reverse mortgage lenders in Michigan.
- Closing Costs: Closing costs are financed into the loan and include, but are not limited to, the appraisal, title insurance, FHA mortgage insurance premium, origination fee, recording fees and escrow/settlement fees.
- Interest rates: The interest rate charge varies depending on the reverse mortgage program selected. Here are 2 popular categories for reverse mortgages, the HECM monthly adjustable and the HECM annual adjusting. Over 95% of participants select the monthly adjustable program. In addition to the adjusting rates there is a fixed rate available. All programs have lifetime caps on the maximum allowable rate.
- Impact on Income Taxes and Social Security: Proceeds from a reverse mortgage are considered to be a loan, not income. Therefore, the funds received are not subject to income tax and do not affect social security benefits. Borrowers receiving Medicaid may not be affected if the funds from the reverse mortgage are spent in the month they are received. The borrower should consult with their tax advisor for further details.
- Repayment: The reverse mortgage becomes due and payable at the time the borrower permanently leaves the home. If the borrower passes away, the heirs have 6 months to sell the property, or obtain a conventional loan to purchase the home. You can request a three month extension a couple times if needed.
The loan balance consists of the financed closing costs, the cash that has been advanced to the borrower and any interest which has accrued. Remaining equity belongs to the borrower or their heirs. The reverse mortgage is subject to a non-recourse limit, which means the borrower or their heirs will never owe more than their home is worth.
This Federally funded reverse mortgage has three basis categories of need. Those that have
a real need to meet expenses, those that can meet expenses but don’t have any money to do anything, or those who use it as part of retirement planning using the equity to extend the
money they have on hand.
If you fall into one of these categories, give Kaye Financial
a call and we can determine if this program is right for you,
toll free 1-866-894-5829.
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