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Reverse Mortgage Frequently Asked Questions

 

What Do I Need To Be Eligible For A Reverse Mortgage?

To qualify for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence. As part of the qualification process, all applicants must submit to a financial assessment to determine their financial capacity and willingness to pay obligations.

How Is The Money From A Reverse Mortgage Distributed?

There are several different options. You can take the money in a lump sum (up to HUD’s first-year maximum withdrawal), set up a line of credit, monthly payment, or a combination of all three. In the first year, the line of credit or monthly payments cannot exceed 60% of the principal limit. After the first year, the available line of credit or monthly payments will be increased when applicable

How Much Money Will I Receive?

The amount of money that a lender will loan depends on how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The payoff of your existing mortgage and mandatory obligations along with the payment option chosen will affect the amount of money you will receive. HUD limits borrowers to using 60% of the available money (after closing costs & fees) in the first year. The remaining funds are accessible in the following year.

Is Counseling A Requirement Before Getting A Reverse Mortgage?

Yes. Counseling with an independent third party HUD-approved counselor is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must have a copy of the counseling certificate before they can close the loan. We will work with you to locate a reverse mortgage counselor near you.

Is The Money I Receive From My Reverse Mortgage Taxable?

While the proceeds you receive from a reverse mortgage are typically not subject to individual income taxation, you will need to consult your tax advisor.

What Costs Are Associated With A Reverse Mortgage?

Similar to a traditional mortgage, the fees of a reverse mortgage are based on a number of items. For example:

  • an origination fee is paid to the broker/lender
  • a MIP (mortgage insurance premium) is paid to FHA on the Home Equity Conversion Mortgage (HECM)
  • an appraisal fee
  • a flood certification fee
  • a document preparation fee
  • title, settlement, and escrow fees. 

All costs are clearly shown on the Good Faith Estimate (GFE). Monthly servicing fees could apply.

What Fees Will I Have To Pay To The Reverse Mortgage Lender During The Course Of My Loan?

A reverse mortgage was created so borrowers don’t have to pay fees during the course of the loan. Typical upfront costs include the cost of an appraisal and HUD-approved reverse mortgage counseling (some agencies waive counseling fees at their discretion). However, there may be a monthly servicing fee associated with reverse mortgages (which will be financed and added to the loan balance). We will review this with you during the application process. But you can always obtain more information on the service set-aside by talking to your loan originator at any point throughout the loan.

What Are The FHA Mortgage Insurance Premium Charges?

The upfront Mortgage Insurance Premium (MIP) is calculated at 2.0% of your home’s appraised value or a maximum of $726,525 (the national lending limit cap of $726,525). For example, a home appraised at $275,000 would have a one-time upfront FHA insurance premium of $5,500. The ongoing FHA insurance premiums are .5% (one-half of one percent) of each month’s calculated outstanding loan balance.

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    Copyright © 2024 EstaR Mortgage™ a DBA of Mutzig Management, Inc NMLS Consumer Access NMLS#1547521. Christopher A. Freck NNMLS#241125, licensed by the California Bureau of Real Estate, BRE License #1454795, State of Oregon Division of Financial Regulation Mortgage Lending License & Washington State Dept of Financial Institutions, NMLS#241125. Mutzig Management, Inc. Licensed by the California Bureau of Real Estate, BRE License #2020370, State of Oregon Division of Financial Regulation Mortgage Lending License ML-5741 & Washington State Dept of Financial Institutions MB-1547521, NMLS#1547521.