FAQ

If you have not already, we suggest that you first read Reverse Mortgage Basics.

Q: What is a reverse mortgage?
A:
A reverse mortgage is home loan for people over the age of 60 that does not require any monthly mortgage payments. It is similar to a line of credit, except that does not require monthly loan payments and can be only loan on the home.

Q: Does the bank take the house?
A:
No. A reverse mortgage only a loan on the home. The title remains in the name and control of the borrower.

Q: When is a reverse mortgage repaid?
A:
When the homeowner sells the property, moves out, or is deceased. If there are two homeowners and one passes away, the loan continues as normal with the second homeowner.

Q: What is repaid to the bank?
A:
Only the amount of money paid to or on behalf of the homeowner, including interest that has accrued on the loan.

Q: What are the borrowers’ obligations?
A:
Keep current the property taxes and home owners insurance, maintain the home in a basic livable condition, and continue to occupy the property.

Q: In what ways can the reverse mortgage money be paid to me?
A:
With the flexibility of a line of credit, the funds are available as follows:

  1. Lump sum up front - often used to pay off an existing mortgage
  2. Line of credit – tap into it at any time and in any amount up to your credit limit
  3. Tenure – a monthly payment for as long as you live in the home
  4. Term - a monthly fixed amount for a predetermined period of time
  5. Any combination of these choices

Q: What happens if I use up all the money from my reverse mortgage?
A:
If you have pulled out all of the money from a reverse mortgage lump sum, line of credit, or term payments, nothing happens. The loan simply continues and remains in place, with no mortgage payments due. To ensure that the money from a reverse mortgage never runs out, choose the tenure option.

Q: What can I do if I use up all the money?
A:
You can continue to live in your house, without payments; you can sell the house (and pocket the net proceeds); or if you qualify, you can refinance the reverse mortgage and get an additional money.

Q: Must the home eventually be sold to repay the loan?
A:
No, the reverse mortgage can be repaid and the home kept in the family. Usually, this is done using a traditional mortgage.

Q: How much equity do I have?
A:
You can figure your current equity by subtracting your mortgage from the current value of your home. For example, if your mortgage balance is $50,000 and your home is worth $200,000, then the equity that you have in your home is $150,000.

Q: What if I already have a mortgage?
A:
The proceeds from your new reverse mortgage must first be used to pay off any existing mortgage, thereby eliminating your mortgage payment. The amount of reverse mortgage money remaining is available to you as described above.

Q: What kinds of property do not qualify for a reverse mortgage?
A:
Vacation houses and other non-primary homes, mobile or manufactured homes manufactured prior to June 15th 1976, multi-unit properties with greater than four units and housed constructed on leased land are not eligible.

Q: What if I have set up a Trust?
A:
A home in a trust will usually qualify for a reverse mortgage. The trust documents must be reviewed by the lender.

Q: Are reverse mortgage proceeds taxable?
A:
The Internal Revenue Service usually considers reverse mortgage money to be loan advances and not taxable income. Please consult your tax advisor.

Q: Can the interest charged on my loan principal be deducted for tax purposes?
A:
Usually, home mortgage interest is deductible when you actually pay it. If you need the tax deduction, you may pay the interest on the reverse mortgage. Please consult your tax advisor.

Q: How do the monies from a reverse mortgage affect Social Security, Medicare or pension benefits?
A:
A reverse mortgage usually does not affect any benefits. For your specific situation, we recommend that you consult your benefits provider.

Q: If I take out a reverse mortgage will, my Supplemental Social Security (SSI), Medicaid benefits be affected?
A:
As long as any cash advances are fully spent every month, a reverse mortgage will not usually affect these or most other "means tested" benefits. Program rules change periodically so check with the local Area Agency on Aging or benefits provider.

Q: What are the closing costs?
A:
An origination, title and escrow fees. These costs are usually paid with loan proceeds, not out-of-pocket. Please request a free quote to see the closing costs for your circumstances.

Q: What if the reverse mortgage balance overtakes the value of my home?
A:
You can never owe more than the value of the home regardless of loan balance because reverse mortgages are "non-recourse" loans. In this unlikely scenario, you can continue to live in your home payment-free.