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Can You Qualify & How to Apply
In plain English, a reverse mortgage is merely an equity loan secured by your home designed to defer repayment. It’s really that simple.
The most common sort of reverse mortgage is the HECM, that is the acronym for the Home Equity Conversion Mortgage. The Federal Housing Administration created this program in 1988. While a traditional home mortgage requires the homeowner to make scheduled monthly payments over a specified term, (usually 30 years) that the inverse mortgage interest isn’t due until the loan reaches maturity. Provided that you have a fantastic amount of home equity built up, keep living in your home as your primary residence (not leaving for a period more than 12 consecutive months) and continue paying your property taxes and insurance you can take advantage of the reverse mortgage program.
You own your dwelling.
With a reverse mortgage lender in florida, you continue to own your house, paying your property taxes and homeowners insurance just as before. Like any mortgage, you’ll be given a monthly statement which will outline all interest charges and balance information. The only difference will be the absence of a coupon to return your monthly payment because no payment is essential. At anytime you’re welcome to repay the interest charges partly or in full without penalty.
Reverse mortgages are available to all US citizens and Florida Residents age 62 or older with significant equity in their home. The maximum loan amount you may qualify for is based on the youngest homeowner’s age, current prices, and home value. As this is a loan based on life expectancy, the number of funds that may be borrowed starts at roughly 50 percent of your house value at age 62 and increases slightly for older homeowners. (age chart below)
Reverse Mortgage Age Tables
AGE % OF HOME VALUE AGE % OF HOME VALUE
62 0.524 72 0.591
63 0.530 73 0.599
64 0.536 74 0.606
65 0.542 75 0.614
66 0.549 76 0.622
67 0.556 77 0.631
68 0.562 78 0.640
69 0.569 79 0.648
70 0.576 80 0.657
71 0.583 81 0.665
72 0.591 82 0.674
E.g., homeowner age 68 with a $100,000 home value would get 56.2% of their appraised value which is $56,200.00. These funds could be accessed as one lump sum disbursement, credit line or payment stream.
You are in the driver’s seat.
Some believe that once you get a reverse mortgage, the bank will eat all of the house’s equity leaving your heirs with nothing but a mound of debt. Wrong. While nobody can predict your houses appreciation, you can rest assured that your heirs have no recourse to the reverse mortgage you choose. You may decide to make voluntary repayments of the mortgage interest in part or full without penalty. That is right; you can make payments back on your reverse mortgage. You can also deduct that mortgage interest just as you would a conventional home loan, and you’ll be able to pay off the entire loan at any time with money, selling or refinancing.
How is the loan repaid?
If your heirs decide not to act, the reverse mortgage lender will have no choice but to foreclose on the home. In case the sale of this property does not yield sufficient funds to pay off the balance of the loan, the government insurance which you would have paid for as a component of closing your reverse mortgage loan will cover your property. The lending company will be reimbursed for any shortfall from the mortgage insurance fund.
Who’s it for?
Anyone who has desires or needs which can’t be met with their current income levels. Reverse mortgages are a terrific tool to assist you to stay in the home you love or to enhance your retirement years simply.
Who is it NOT for?
Because there are typical costs associated with setting up a reverse mortgage, (appraisal and origination fees), it isn’t recommended for men and women that do not intend to live in their home for a fair amount of years to realize its advantages.
Cash received by any mortgage isn’t considered income and will not be taxed.
The Federal Housing Administration would like you to understand the reverse mortgage fully and requires that all applicants receive impartial 3rd party counseling by phone or in person. Once the counseling is completed, you will be given a certificate of completion that is then signed and delivered to a lender of choice.
Even though reverse mortgages do not affect public benefits such as Social Security and Medicare, the cash proceeds can impact eligibility for those that are getting “needs based” local or state help.
This is not specific to a reverse mortgage but as to any extra funds that could change the qualifications on these kinds of programs. Like every mortgage, it pays to shop around. Compare offers from both banks and brokers alike and do not be fooled by the common sales pitch “they are all the same” or “we service our own loans”.
The simple fact of the matter is ALL reverse mortgages carry the same safeguards, and there’s only one federally insured HECM so don’t settle for less cash or higher interest charges.
In 2014 the FHA introduced what’s called “Financial Assessment” to the reverse mortgage program requiring lenders check a borrower’s capacity to repay their ongoing obligations such as property taxes and homeowners insurance. If you’ve had no severe late payments within last 24 months on property charges or other consumer credit and earn enough income to reasonably keep your taxes and insurance you ought not to have a problem qualifying for the reverse mortgage.
Special thank’s to Lord Mortgage & Loan