Reverse Mortgages

What is a Reverse Mortgage?

Reverse mortgage loans are a way for homeowners 62 or older to convert their home’s value into cash or monthly payments without having to sell or move. Insured by the FHA  Mortgage Insurance program, the Department of Housing and Urban Development (HUD) allows these Homeowners to either borrow against the equity of their homes or purchase a new home based on the value or purchase price of that new property.

This is How a Reverse Mortgage works –

  • Qualifying homeowners can choose to receive generally tax-free payments from reverse mortgage lenders either on a monthly basis, in a lump sum, or as a line of credit. Consumer should consult a tax adviser.
  • Income, assets and liabilities will be verified.
  • No repayments are required as long as at least one borrower lives in their home as well taxes, insurance and HOA dues are paid on time and the home is maintained in good condition.
  • Social Security and Medicare benefits are not affected.
  • Reverse mortgage lenders recover the loan amount, plus accrued interest and mortgage insurance when the last homeowner passes away, chooses to sell the home or a family member chooses to purchase the home (for more details contact me).
  • When the loan is paid in full, all remaining equity associated with the property will be distributed to your heirs. Must comply with the terms of the mortgage.

Who is eligible for a Reverse Mortgage?

You must be age 62 or older Non-borrowing spouses under 62 must apply for the reverse mortgage loan, attend a HUD counseling session. In all states the HUD counseling is either handled in person, or over the telephone by a HUD counselor.

What are my options and how much can I borrow?

HECM — The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is insured by the Federal Housing Administration (FHA). The FHA guarantees that HECM lenders meet their obligations, governs how much HECM lenders may loan to qualified borrowers, and limiting loan costs. Because this is a government insured program, loan counseling is required, by an approved HUD counselor.

HECM offers 4 draw options:

      • Monthly income for a fixed term, or life
      • Line of credit
      • Lump sum
      • Any combination of the above 3

Equity Available by Age

Age of Borrower Percentage range of equity available through a reverse
62 39-40%
67 43-44%
72 45-46%
77 49-51%
82 55-56%
87 61-62%
90* 68-69%
*Equity does not increase over age 90 (Subject to change based on economic data)

How do I apply?

These basic steps describe the application process from start to finish.

Your Application

Your application begins the process with the lender. It specifies fees, interest rates, loan amounts, and more.

Documentation

At this point you will begin collecting the documents required to be approved for the Reverse Mortgage. These may include such things as: mortgage statements, homeowners insurance, bank statements, ID’s, paystubs or other proof of income and tax returns.

Reverse Mortgage Counseling

Your lender is not allowed to proceed until you complete mandatory counseling with a HUD-approved counselor. List of approved agencies are available from the lender or online at www.hud.gov.

The Appraisal

In order to proceed, you will need to know the market value of your property through an FHA-approved appraisal that the lender will order.

Underwriting

For underwriting, legal ownership is confirmed in a title search. If someone remains on the title that no longer lives in the home or is deceased, additional paperwork may be required to clear title. The underwriter will also review the appraisal, the financial assessment and insure the loan is in the best interest of the borrower and the lender.

Closing

At closing, all aspects of the loan are reviewed and signatures obtained on final loan documents with a notary and after a three day waiting period you will receive the money, or proceeds, from your reverse mortgage. On a Purchase, the loan will fund the same day. On a Refinance, you can choose to receive the payment in one of three ways: as a lump sum, as a monthly payment or as a line of credit. Then it’s up to you: pay bills, fix up the house, help a family member, or use the money to enjoy your life.

Is a Reverse Mortgage right for you?

The first step we like to take is talk with you, either over the phone or in person, about whether a reverse mortgage is right for you. We talk about the pros and cons, how it works, the various options, how much money you might receive and anything else you’d like to know. Then you decide whether you wish to take the next step.

The Mortgage Company offers Reverse Mortgages in Salina, Topeka, Lawrence and Wichita and surrounding cities in Kansas.

 Contact us for more details by completing one of our interactive forms on this website or call us at 785.825.8100.