Q: Can I ever owe more than the value of my home?
No. A reverse mortgage is a “non-recourse” loan which means that you never have to pay back more than the value of your home at the time the home is sold. This is true regardless of your loan balance when you or your heirs sell it. Because HUD insures reverse mortgages, the government would be responsible to pay the lender the difference. Therefore, you pay a Mortgage Insurance Premium (MIP) to HUD.
Q: How much do I pay back at the end of the loan?
At the end of the loan, you would pay back the total of your initial draws and any subsequent draws, plus all interest and fees accrued during the life of the loan.
Q: Do I still own my home?
Yes. Just like all other traditional loans, you still own your home, and have complete control over it. The reverse mortgage is only a lien on the home.
Q: What happens to my home if I die?
At the time, the last surviving borrower dies, the reverse mortgage must be paid in full with all interest and fees. This can be done by the heirs selling the home or paying off the reverse mortgage with cash or new financing.
Q: If I die and my heirs wish to sell the home to pay off the reverse mortgage how much time will they have to do so?
If your heirs cannot afford to pay off the reverse mortgage without selling the home, HUD will give at least 6 months for the sale, and extensions can be granted in certain circumstances.
Q: How do I know how much I owe during the term of the loan?
Each month you will receive a monthly statement which will give you the status of your account including such things as your outstanding loan balance, periodic interest charges and fees, and other pertinent information.
Q: If I choose a credit line, how do I request funds when I need them?
Line of credit draws are typically done by mailing or by faxing a request form signed by the borrowers. The funds are commonly wired to the borrowers account within 3-5 days. For emergencies, there are expedited methods. Talk with your reverse mortgage servicer.
Q: Can I change the way I get my money after I close?
Yes. There are three ways to receive money from a reverse mortgage, a lump sum, a monthly payment (to you), or a line of credit. If after you close you wish to receive your funds in a manner different than the method you chose at closing, you have the option of switching methods by notifying the servicing lender at any time.
Q: If interest keeps accruing on my reverse mortgage over time, doesn’t it become very expensive?
It depends on how you look at it. A reverse mortgage has no monthly payments, so as interest and fees accrue, your loan balance goes up over time, and your savings account stays the same. With a traditional loan, your loan balance would not go up, but you would be making monthly payments, so your savings account would be going down over time.
Q: If my spouse is not 62 years old yet, can I obtain a reverse mortgage?
Yes. For married couples, where only one spouse is 62 years or older, there is a “non-borrowing spouse” option. With this option, the age qualifying spouse obtains the reverse mortgage and is the sole borrower. The underage spouse is considered the non-borrowing spouse, and is not a borrower on the loan. However, should the borrower pass away, the normal requirement for the loan to be repaid is “deferred” if the non-borrowing spouse remains living in the home. Additionally, during the deferral period, the non-borrowing spouse may not receive any funds from the reverse mortgage. The non-borrowing spouse option has specific requirements and may not apply to all married couples. Contact Steven for more details about your specific situation.