Q: What is a reverse mortgage loan and how does it work?
A: A reverse mortgage is a special type of loan that allows you to borrow against a portion of the equity that you've built up in your home. You can use the money for anything you like including paying medical bills and making home improvements. Unlike a traditional home equity loan, a reverse mortgage doesn't need to be paid back immediately, perhaps not even during your lifetime.
Q: Can anyone apply for a reverse mortgage?
A: You must be at least 62 years old and you also must own your home outright or be able to pay off your home with the proceeds from a reverse mortgage. You must live in your home and your home must meet certain criteria according to HUD.
Q: How do I apply for a reverse mortgage?
A: You can get a reverse mortgage through a reverse mortgage lender. You can receive the reverse mortgage in a lump sum, a line of credit or monthly payments. The loans are available in adjustable and fixed interest rates. If you choose a fixed interest rate, you will be required to take all of your proceeds in a single lump-sum payment.
Q: If I take out a reverse mortgage, does the bank own my home?
A: No, the title remains with the borrower. Like all mortgage loans, the borrower remains responsible for paying property taxes and insurance, maintaining the home, and complying with the loans terms. When the home is sold or no longer your primary residence, you or your estate will need to repay the lender any cash you received from the reverse mortgage, plus interest and other fees. Failing to comply with the loan terms can also result in the loan becoming due and payable. Any remaining equity in the home belongs to you or your heirs.
Q: Do I still need to pay my property taxes and home insurance with a reverse mortgage?
A: Yes, you would have to pay those expenses and your homeowner’s insurance policy must be current. Additionally, where necessary, you also need to be current on any homeowner's association fees.
Q: When does the reverse mortgage have to be paid back?
A: When the homeowner dies, sells their residence or permanently relocate. Additionally, the loan also becomes due if you default on the loan by not paying your property taxes or homeowner's insurance, or if the property conditions deteriorate and necessary repairs are not made.
Q: Are reverse mortgages expensive?
A: There are substantial upfront fees (i.e., mortgage insurance premiums, loan origination fees and closing costs) with these loans, as well as ongoing fees (mortgage premiums, interest and servicing fees), during the course of the loan.