Top 10 most Frequently Asked Reverse Mortgage Questions
Over the years, we have been asked thousands of questions about the reverse mortgage loan for Texans. Based on this experience, we have compiled a list of the top 10 most frequently asked questions.
How do I know if I am eligible for a reverse mortgage loan?
In Texas, all borrowers on the loan must be 62 years or older. In addition, you must have equity in your home, and the home must be your primary residence.
Will the bank own my home?
Absolutely not! The bank or lender does not own your home. The lender simply has a lien against your property just like any other mortgage. You still retain ownership as long as you live in the home, maintain the home, and pay your property taxes and insurance.
Will my heirs owe the bank?
Reverse mortgage loans are known as "non-recourse" loans, meaning if, under the circumstance more is owed to the lender than the home is worth, and the loan is due (based upon death, sale, or vacating the premises), the maximum amount the heirs are required to pay the lender is the value of the home at the time of repayment. The bank cannot come after the family ("non-recourse") for the difference. So, the usual course of action is to sell the house.
Are proceeds from a reverse mortgage loan taxable?
Proceeds from a reverse mortgage are not considered true income by the IRS. Therefore, proceeds are non-taxable. (Note that we are not tax advisers and this should not be considered tax advice. Please consult with your own trusted tax adviser.)
Does my home need to be free and clear of mortgages to qualify for a reverse mortgage loan?
Not at all. In fact, many get a reverse mortgage loan specifically to pay off a traditional mortgage and remove the burden of that payment. (Remember, the reverse mortgage loan does not require a monthly mortgage payment, but you do have to continue to live in the home, maintain the home, pay your property taxes and homeowner's insurance.)
Are reverse mortgage loans safe?
Reverse mortgage loans are insured and regulated by HUD (Housing and Urban Development). HUD has instituted safeguards for consumers. First, they regulate the amount of closing costs a lender may charge. Next, HUD requires you to have a counseling session, with a HUD approved counselor, prior to obtaining a reverse mortgage loan. The HUD counselors are a neutral third party and will help you understand how the loan works. Finally, the reverse mortgage is a non-recourse loan (see "will my heirs owe the bank" above).
What are the costs?
Like any other mortgage, there are closing costs. You can expect an origination fee on some loans, appraisal fee, underwriting fees, servicing fee, title fees, mortgage insurance fee, and recording costs. Costs are generally higher than conventional mortgages due to the up front mortgage insurance fee, however, most of these fees can be paid out of the loan rather than "out of pocket".
How much money will I receive?
This is determined by a combination of several factors: By your age (or the age of your younger spouse), the value of the home, and interest rates at the time you close on your reverse mortgage loan. Click here to fill out a quick questionnaire to see how much you can get. Or, call us to go over your options. 855-469-7383, Ext. 802
Why get a reverse mortgage loan rather than a home equity line of credit (HELOC)?
The biggest reason you may choose a reverse mortgage loan instead of a HELOC is because you don't have to pay the money back to the bank unless or until you either pass away, move, sell your home, or violate any of the terms of the mortgage (such as failing to pay your homeowner's insurance or taxes or failing to maintain the home). Home equity lines of credit (aka second mortgage) will create another monthly bill for you. Additionally, a bank can repossess your home if you fail to make the payments on the home equity line of credit. The bank can also reduce or even cancel the amount available to you if the home doesn't retain a certain value. Since you have no payments to make for the reverse mortgage loan, there is no fear of the bank taking back your home as long as you continue to meet the obligations of the loan.
What are my payment options?
You can receive payments in three different ways: 1. Fixed Monthly Payments: This offers you a monthly, tax-free, cash payout throughout the term of the reverse mortgage loan. In this instance a calculation will be made, based upon your age, interest rate, and the value of the house, as to how much tax-free cash payout you will receive on a monthly basis. 2. Lump Sum: You may take the entire amount out all at one time. 3. Line of Credit: Allows you to take money out at any time, and interest is accrued only on the money you have withdrawn. This has become a popular plan because it allows you to take money out on an "as needed basis". Also, any unused portion of the line of credit has a growth rate which increases your borrowing power over time. Many people opt for a combination of these payouts.
Still have questions? Call to speak with a Texas reverse mortgage loan specialist now! 855-469-7383, Ext. 802
A reverse mortgage loan is for the primary residence of homeowners (age 62 years or older). The owner(s) retain title to the home that is the subject of the reverse mortgage loan until they sell or transfer the property. Although no monthly mortgage payment is required on the loan, the homeowner must continue to pay for property taxes, homeowner's insurance, maintenance, HOA dues or any other related taxes. Failing to pay these amounts, or failure to maintain the condition of the property, may cause the reverse mortgage loan to become due immediately.
We are not legal or tax professionals. This information should not be construed as legal or tax advice.
State of Texas Disclosures: American Home Reverse, LLC. is licensed under the laws of the state of Texas and by State law is subject to regulatory oversight by the Texas Department of Savings and Mortgage Lending. Consumers wishing to file a complaint against a company or a residential mortgage loan originator should complete and send a complaint form to the Texas Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, Texas 78705. Complaint forms and instructions may be obtained from the department’s website at www.sml.texas.gov. A toll-free consumer hotline is available at 1-877-276-5550. The Department maintains a Recovery Fund to make payments of certain actual out of pocket damages sustained by borrowers caused by the acts of licensed residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at www.sml.texas.gov.
This information is not from HUD or FHA and was not approved by HUD or any government agency.
Click here to read important disclosures.
American Home Reverse, LLC. 6060 N. Central Expwy., Ste. 500 Dallas, TX 75206 Corp. NMLS #1808617 | NMLS #773830
Phone: 855-469-7383, Ext. 802 Email: firstname.lastname@example.org