When it comes to Reverse Mortgages, for most people, it’s a product that is new. After all, it’s not relevant to an individual until either they are age eligible or almost 62 OR if someone has a friend or loved one that is considering a Reverse Loan. We’ll take a look at some extremely common, basic FAQ’s as well as some more complex reverse mortgage frequently asked questions. Also, there will be some questions that arise that will be added to this website over the course of time.
Let’s start with the most basic frequently asked questions:
Question; What type of property must I own?
Answer; Single family dwellings, condominium units whose HOA is approved with FHA/HUD, 2-4 unit owner occupied dwellings, HUD approved manufactured homes built after June, 1976, & Townhomes.
Question; Can I get a HECM (aka Reverse Mortgage) on a coop.?
Answer; At present, coop’s and manufactured condo projects are not allowed.
Question; Can I do a Reverse Mortgage if I currently have a home loan?
Answer; You Absolutely might! Let’s say you currently owe $75,000 and you qualify to get $125,000 total. In this case, you’d first have to pay off your existing loan (the reverse loan must be the only lien on your property), thereby eliminating your monthly payment to the bank and then you’d have the other $50,000 left over (minus any applicable closing costs) to do whatever you like.
Question; What impact will this have on my Social Security Income and Medicare?
Answer; This type of financing will NOT have any impact on both Social Security and Medicare. However, it could have an impact on other government provided benefits. For example, it could have an impact on MediCaid, or SNAP, etc. It’s advisable to check with the agency that provides the assistance you are getting.
Question; How much money will I get from a reverse mortgage?
Answer; the percentage you get changes periodically, but as of now, you can get anywhere from 52.4% to 75% of the appraised value of your home. If you happen to have a spouse that’s younger than 62 years of age, it will decrease the percentage you get.
Question; What if I am old enough to do it, but my wife or husband is not?
Answer; You may be able to do still do it. Your younger spouse will be what’s known as a Non Borrowing Spouse. They won’t actually be on the loan, BUT they will be able to live in the home for the rest of their life without a monthly payment to the bank. However, the amount you get will be based on the younger spouse’s age, so the youthfulness of your younger spouse could potentially hinder you from getting a reverse mortgage (at least for now).
Question; How much does the counseling for a RM cost?
Answer; $125.00 is the average. Once in a while you’ll see it for $90.00. Some of the places will charge more if you pay at closing (like $175).
Some places offer free counseling due to a pool of grant money that is to be used specifically for Reverse Mortgage counseling. Typically, with this, you’ll be subject to a financial assessment as it can often times be needs based AND you’ll see slower turn times in terms of how quickly you get your appointment. Just simply ask the counselor you call if they have any free counseling available. If any particular agency tells you “no”, then you can simply call the next place on the list.
Question; What exactly is a full LESA?
Answer; It’s an acronym for Life Expectancy Set Aside. It’s basically an account where if a prospective reverse mortgage borrower doesn’t pass the financial assessment, it doesn’t disqualify them from getting the loan but it means that they may have to do this set aside. For example, let’s say a prospective borrower’s home is worth $190,839 and they are 62 years old and get a total loan amount / principal limit of exactly $100,000.
Let’s also assume that their life expectancy is for 10 years. If their taxes and insurance total $1000 per year, it means that we’d need to hold $12,000 for the LESA. The end result is that out of the $100k they have available in the loan they’ll only be able to access $88,000 (less any applicable closing costs) because we’ll be holding the $12,000 to pay their taxes and insurance. The bonus for the homeowner is that they’ll never have to worry about where they’ll get the money to pay for taxes and insurance for their home (assuming they don’t outlive their life expectancy).
Where it could present a problem if they have a total loan amount of $100,000 and their closing costs and loan pay off also amount to $100k……………………if they were required to have a LESA then in this case they would be $12k short to close.
More to come….
Shawn Lawrence Vaillancourt
NMLS License # 387151. Personally Licensed in CO, CA, WA, OR, MD, VA, but I do have a staff that is licensed in virtually every other state in America.
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