Understanding Reverse Mortgages - Frequently Asked Questions
By Garrett F. Duffy, Norcom Mortgage, Guest Blogger
According to professional fiduciary and certified elder law Attorney RJ Connelly III, many of our clients have questions about reverse mortgages. Although most are familiar with reverse mortgages, only a few fully comprehend them, so understanding reverse mortgages is imperative. For example, some borrowers are unaware that they must continue paying taxes and insurance with a reverse mortgage. As a result, we are pleased to welcome Garrett Duffy from Norcom Mortgage as a guest blogger to answer some of the most frequently asked questions about this financial product.
What is a Reverse Mortgage
A reverse mortgage is a safe, secure, and easy way for seniors to turn their home’s equity into cash to meet any financial need. Unlike traditional home equity loans, a reverse mortgage does not require repayment of any kind until your home is sold, or you permanently leave the home.
What can a Reverse Mortgage be used for?
Reverse mortgage borrowers may use the proceeds however they wish. Some examples include:
pay off a mortgage
pay off credit cards
pay off home equity loans
make home repairs
pay property taxes
purchase a home.
How do I Qualify for a Reverse Mortgage?
You must be at least 62 years old, own your home, and occupy the home as a primary residence. You must also have a significant amount of equity built up in your home. As a general rule of thumb, you should have at least 50% equity in your home.
How Much Money Can I Take Out of My Home?
That will depend on your age, the interest rates, and your home’s value. Older borrowers generally qualify for more funds.
How do I receive the Proceeds?
You can take your funds as a lump sum, a line of credit, or as monthly payments. You can also use a combination of these options.
What Are My Obligations if I Take out a Reverse Mortgage?
Maintain the home in a state of good repair. The home must remain your principal residence and you must stay up to date on all property charges such as property tax and homeowners' insurance.
Will I Have to Repay the Loan?
The loan becomes due when the home is no longer the borrower’s principal residence. This happens when the borrowers die, the home is sold, or the borrowers live in a nursing home for 12 months or more.
What Happens When I Pass Away? Can I Leave My Home to My Heirs?
After the borrowers have passed, the heirs have multiple options. They may choose to sell the home, refinance the home, pay off the home, or walk away through the use of a deed-in-lieu of foreclosure. If the heirs decide to sell or refinance, the reverse mortgage is paid off at closing and any remaining equity becomes their inheritance. It is also important to know that a reverse mortgage has non-recourse protection—which means that you or your heirs will never owe more than the home’s value.
Does the Bank Own My Home?
No. A reverse mortgage allows homeowners to retain the title and ownership of their home for as long as they live in the home and the loan remains in good standing. Like other loans, this requires the borrower to keep up with property taxes, insurance, and maintenance.
For more information or to see if a Reverse Mortgage is right for you contact:
Garrett Duffy / Vice President / Branch Manager
Norcom Mortgage / NMLS – 1626638
Please note that the views and opinions expressed in our guest blogs belong solely to the author(s) and do not necessarily reflect the opinions or views of Attorney RJ Connelly III or any employees at Connelly Law Offices, Ltd.