Q: What is a HECM reverse mortgage?
A: A HECMreverse mortgage is a way to turn a portion of the equity in your home into cash. A reverse mortgage could protect your home from unexpected expenses such as a nursing home or long term care*. It could also provide you with additional cash flow for all the expenses you have. As long as all loan terms are met, the loan does not require repayment until you sell, permanently move out of your home, or until the last person on the title passes away.
* This does not constitute as financial advice. Please consult a financial advisor for your specific situation.
Q: What is the difference between a Reverse Mortgage loan and a Home Equity Loan?
A: Home Equity Loan is a loan that requires you to make monthly payments on the principle and interest. Sometimes they require a balloon payment and you’re not guaranteed access to the line of credit (LOC) funds. A Reverse Mortgage Loan is a non-recourse loan that you do not have to pay monthly payments on, except for taxes and insurance and maintain the home. As long as all loan terms are met, the loan cannot be canceled or frozen and guarantees access to any unused funds.
Q: Do I qualify for a HECM reverse mortgage?
A: To qualify for a reverse mortgage all borrowers must be at least 62 years of age.
Q: Can I apply for a HECM if my current house wasn’t purchased with an FHA loan?
A: Yes. Regardless if you have a home loan or own free and clear you can still apply.
Q: How does a Reverse Mortgage affect your heirs?
A: Your heirs can inherit a home that has a reverse mortgage on it, just like they would a traditional mortgage. They will be given up to six months with two 90-day options to extend in order to decide if they will sell it, sign it over as a deed in-lieu of foreclosure, or satisfy the outstanding balance. An appraisal can be ordered to help in making the decision to see if there is equity after the loan is paid off and costs of sale. Alternatively, your heirs can purchase the home for 95% of the appraised value or the mortgage balance, whichever is lower. (NOTE: This does not constitute legal advice. You should consult an attorney for your specific situation.)
Q: When you purchase a home with a reverse mortgage loan will the loan be held on your existing home or your newly purchased home?
A: The reverse mortgage loan will be held on the newly purchased home as your primary residence. The down payment you will need to bring to closing is usually between 30-70%.
Q: Why is my down payment higher with a reverse mortgage?
A: Your down payment is higher initially because you will never be required to make a monthly payment (except for taxes, insurance and maintain the home). With a traditional mortgage you will lose much more in cash flow over the years because of the consistent required payments.