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How Much Money Can I Get. The amount of funds you
are eligible to receive depends on your age (or the age of the youngest spouse in the case of couples), the appraised
home value, interest rates, and in the case of the government program, the lending limit in your area. In general, the
older you are and the more valuable your home (and the less you owe on your home), the more money you can get. Back to Top
Does My Home Qualify. Eligible property types include single-family homes,
2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, cooperative
housing is ineligible. However, some lenders have developed private programs that lend on co-ops in New York.
Leasehold properties in states such as Maryland are eligible. Back to Top
What are My Payment Plan Options. You can choose to receive the
money from a reverse mortgage all at once as a lump sum, fixed monthly payments either for a set term or for as long as you
live in the home, as a line of credit, or a combination of these. The most popular option – chosen by more than 60
percent of borrowers – is the line of credit, which allows you to draw on the loan proceeds at any time. To learn
more, click here. Back to Top
My Understanding is that the
Unused Balance in the Line of Credit Option Has a Growth Feature. Does that Mean I'm Earning
Interest? No, you're not earning interest like you do with a savings account. The growth factor, which
is equal to roughly the interest that you're being charged, takes into consideration that your home has appreciated in value
over the past 12 months and that you are one year older. Back to Top
How Can I Use the
Proceeds from a Reverse Mortgage. The proceeds from a reverse mortgage can be used for anything, whether its to
supplement retirement income to cover daily living expenses, repair or modify your home (i.e., widening halls or installing
a ramp), pay for health care, pay off existing debts, buy a new car or take a "dream" vacation, cover property taxes, and
prevent foreclosure. Back to Top
How Does the Interest Work on a Reverse Mortgage.
With a reverse mortgage, you are charged interest only on the proceeds that you receive. Most reverse mortgages charge
a variable interest rate (although fixed rate products are entering the marketplace) that is tied to an index, such as the
1-Yr. Treasury Bill or the London Interbank Offered Rate (LIBOR), plus a margin that typically adds an additional one to
three percentage points onto the rate you're charged. Interest is not paid out of your available loan proceeds, but instead
compounds over the life of the loan until repayment occurs. Back to Top
Are There Any Special
Requirements to Get a Reverse Mortgage. As long as you own a home, are at least 62, and have enough equity
in your home, you can get a reverse mortgage. There are no special income or medical requirements. Back to Top
What If I Have An Existing Mortgage. You may qualify for a reverse mortgage even if you still
owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing
indebtedness must be paid off. You can pay off the existing mortgage with a reverse mortgage, money from your savings,
or assistance from a family member or friend. For example, let's say you owe $100,000 on an existing mortgage.
Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this
scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish.
If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your own savings to get
the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage.
On the other hand, you won't have a monthly mortgage payment anymore. If you find yourself in a deficit situation
where you don't have enough money to pay off the existing mortgage, you may use funds from a grant or gift from a family member
or friend to cover the gap, but you cannot incur a new debt obligation unless the loan is secured by an acceptable asset(i.e.,
loan). Back to Top
What Is the Service Fee Set-Aside. Under the FHA HECM program,
you are charged a monthly servicing fee that ranges from $30-$35 to manage your account once the loan closes. The SFSA is
an estimate of what the total servicing fees will be over the life of the loan, by multplying your life expectancy
(converted from years into months) multiplied by either $30 or $35. Although it's not considered a closing cost,
the SFSA can equal several thousand dollars, which is deducted from your available loan proceeds. You do not have access to
that money, nor do you earn interest. Back to Top
Will I Lose My Government Assistance If I Get a Reverse Mortgage.
A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid,
any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset
and could impact Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all
the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would
count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an
individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, you should contact the local Area
Agency on Aging or a Medicaid expert. Back to Top
Why Do I Need to Get Counseling.
Counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure you understand the program, and review alternative
options, before you apply for a reverse mortgage. You can seek counseling from a local HUD-approved counseling agency,
or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), and
Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face
or by telephone except in certain states such as North Carolina that require face-to-face counseling. By law, a counselor
must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing,
social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available
to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse
mortgage; and, (iv) the tax consequences affecting the prospective borrower’s eligibility under state or federal programs
and the impact on the estate or his or her heirs. Back to Top
When Do I Pay Back My Loan.
No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your
home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or
permanently move out. The amount owed can never exceed the value of your home. Furthermore, if the home is sold and the
sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate. Back to Top
Under What Circumstances Should I Not Consider
a Reverse Mortgage. Because of the upfront costs associated with a reverse mortgage, if you intend to leave your
home within 2-3 years, there may be other less expensive options to consider, such as home equity loans, no-interest loans
or grants that may be offered by your county government or a local non-profit to repair your home, or a tax deferral program,
if you're having problems paying your property taxes. Also, if you want to leave your home to your children, then you should
consider other options, because in many cases, the home is sold to pay back a reverse mortgage. Back to Top
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