 Q. What is a reverse mortgage?
A. A reverse mortgage is a loan that enables senior homeowners, age 62 and older, to convert part of their home equity into tax-free* income—without having to sell their home, give up title to it, or make monthly mortgage payments. The loan only becomes due when the last borrower(s) permanently leaves the home.
* Consult Tax Advisor. Not all products available in all states.
Q. Can the borrower's current income influence their ability to get a
reverse mortgage?
A. No. Since reverse mortgage borrowers need not make monthly repayments, there are no income qualifications.
Q. Borrowers have heard that with a reverse mortgage the lender would own
their home. Is this true?
A. It’s absolutely false. The borrower retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower.
Because the homeowners retain title, they remain responsible for the payment of property taxes, insurance, utilities, home maintenance, and other expenses - just as they would with a standard first mortgage or home equity loan.
Q. The borrower still owes money on a first or second mortgage. Can they still get a reverse mortgage?
A. Yes. The borrower may be eligible for a reverse mortgage even if they still owe money on a first or second mortgage depending on the outstanding balance of the loans and the value of the home. The funds they would receive in the reverse mortgage would be used to pay off whatever existing mortgages the borrower has on the property.
Q. Would a home that is in a "living trust" be eligible for a reverse mortgage?
A.Yes. In most cases a homeowner who has put his or her home in a living trust can usually take out a reverse mortgage. A review of the trust documents would be made by our underwriting department to determine if anything in the living trust would be unacceptable.
Q. What has to be repaid when the loan becomes due?
A. When the last surviving borrower permanently moves out of the home or dies, the reverse mortgage loan becomes due. The reverse mortgage is paid off from the sale of the house or through a refinance by the homeowner’s heirs. Please note that our program guarantees that the borrower will never have to repay more than the home’s appraised value* regardless of how long they keep the loan or what the ending balance is.
* As determined by a licensed, approved appraiser.
Q. If a borrower takes a reverse mortgage, will they still have an estate that
they can leave to their heirs?
A. When a borrower sells their home or no longer uses it for their primary residence the lender must be repaid for the cash received from the reverse mortgage, plus interest and service fees. Any remaining equity belongs to the borrower or their heirs. Again, please note: our program guarantees that the borrower will never have to repay more than the home’s appraised value* regardless of how long they keep the loan or what the ending balance is.
* As determined by a licensed and approved appraiser.
Q. Must the heir or the last surviving borrower sell the property to repay the
reverse mortgage loan?
A. No. Repayment may be accomplished by refinancing the reverse mortgage with
a traditional "forward" mortgage loan, or through the use of other assets.
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