Question 1

Do I sign my home over to the bank when I get a reverse mortgage?

Accepted Answer

No, with a reverse mortgage you still own your home and are still responsible for taxes and insurance.

Question 2

What happens to the equity in my home when I take out a reverse mortgage?

Accepted Answer

A reverse mortgage doesn't affect home equity any differently than any other type of negatively amortized mortgage. Since you aren't making payments the loan balance will grow through negative amortization, but this amount is calculated for you based on your loan amount so that you can understand what each month or year does to your equity. As far as the future equity that is building in your home a reverse mortgage does not affect this at all.

Question 3

Will my children have to repay the loan?

Accepted Answer

No, reverse mortgages are non-recourse loans. If the property is sold to pay off the loan when the homeowner passes away or decides to leave the home for any reason there will be no mortgage debt for the homeowner, family or heirs to pay. The maximum loan payoff is the current market value of the home. If the heirs want to keep the home they would need to pay the balance in full to the reverse mortgage lender.

Question 4

Can I get a reverse mortgage if I still have an existing mortgage?

Accepted Answer

Yes, if you have enough equity you can still qualify for a reverse mortgage. Some of the proceeds from the reverse mortgage will be used to pay off the existing mortgage.

Question 5

What if I live longer than expected, can the lender evict me?

Accepted Answer

No, there is no time frame. Since you are still the homeowner you cannot be evicted provided you follow the loan guidelines.

Question 6

Aren't reverse mortgages expensive?

Accepted Answer

There are a lot of factors that go into a reverse mortgage. For example, if you live a long life or your property declines in value, the decision to establish a reverse mortgage could end up being an exceptionally good move. In the end you are receiving a loan against your house. If you sell your home and there is equity left after paying it, you can keep it. However, if you owe more than the home is worth, you are not responsible. The equity in your home gives you the means to give you an income source that can make your life much more comfortable.

Question 7

What happens if the owner becomes ill and needs to be moved to a senior care facility?

Accepted Answer

A reverse mortgage is not due and payable until the last surviving borrower dies, sells the home, or does not live there for 12 consecutive months, provided the taxes and insurance are paid and the property is maintained. So as long as one owner lives in the home, the loan will not be affected and will continue to provide cash flow.

Question 8

What demographic of seniors are most likely to get a reverse mortgage?

Accepted Answer

There is no one demographic. Seniors choose reverse mortgages for many reasons including immediate needs such as paying off their existing mortgage or other debts. Others use the money for home improvements, medical expenses or to buy or downsize to a new home without a mortgage payment (called a HECM for Purchase) or as part of a retirement plan. A reverse mortgage can also help with long-term care.

Question 9

Are all reverse mortgages the same?

Accepted Answer

No. While most reverse mortgages are similar, not all lenders are the same. You want to work with a lender who thoroughly understands these types of loans and can go over every option available to you. A good lender will present the facts and let you make the decision without added pressure.

Question 10

Do I have to fix up my home?

Accepted Answer

No, your home doesn't have to be in perfect shape. If there are repairs required by the lender, they can be done after closing in many cases.