Our frequently asked questions section addresses some of the most common questions our clients have about reverse mortgages.
Find answers to some of the most common questions asked when obtaining a reverse mortgage.
What is a Reverse Mortgage?
Reverse mortgages can help make retirement easier for those looking for a way to stay in their home, reduce monthly payments, and free up cash. A reverse mortgage is a type of loan that allows borrowers to pull equity out of their home without having to pay it back right away. One of the most attractive traits of a reverse mortgage is that there are no monthly mortgage payments required.
Your loan balance will increase each month but won’t be due until the last borrower vacates the primary residence or does not comply with all loan terms. The borrower’s property taxes, home insurance, and maintenance will still need to be paid.
Does the bank own my home?
No. Reverse mortgage borrowers retain 100% ownership of the home. Just like a traditional mortgage, a lien will be put on the home. Borrower(s) may not lose their home under normal circumstances as long as they comply with loan terms including paying for taxes, insurance, and maintaining the property. Also, unless a set-aside account is established, an escrow account is not typically set up to pay for taxes and insurance.
How can I receive my reverse mortgage loan proceeds?
The disbursement options for a reverse mortgage depend on the type of product you obtain. Regarding the HECM reverse mortgage, loan funds can be dispersed through a full of or partial lump sum, a line of credit, monthly payments, or a combination of these ways.
When do I have to pay back my reverse mortgage loan?
Most reverse mortgage loans are typically paid back when the last borrower passes away. However, the loan will become due sooner if a borrower sells the home, permanently moves out, doesn’t occupy the property as their primary residence, or fails to comply with the loan terms. It is crucial that borrowers understand that the loan terms require them to continue to pay their property taxes, insurance and maintain the property or they could risk foreclosure.
What happens if the loan amount ends up more than the value of the home?
All of our Reverse mortgage programs are non-recourse loans. This means that if somehow the loan balance ends up surpassing the value of the home, the lender cannot collect more than the value of the home. For example, with a HECM reverse mortgage, the loan balance and the home value is covered by the Federal Housing Administration’s (FHA) insurance fund.