Frequently Asked Questions
Reverse Mortgage Questions
How long does the reverse mortgage process take?
The average time it takes to obtain an federally insured reverse mortgage is approximately 30-90 days. Not every situation is the same and that’s why it can be helpful to chat with a loan officer or lender to get a realistic timeline. Now if you’ve financed your fee for the counseling payment it’s good to know we allow payment extensions at no additional charge while we wait for the funds at closing.
What is the interest rate on my loan going to be?
The interest rate on your loan will depend primarily on whether you chose a monthly adjustable, annual adjustable or fixed interest rate loan. You will discuss rate with your loan officer, and he or she will be able to tell you what the different rates would be for your loan before you make your decision to get an federally insured reverse mortgage.
Will I be able to sell my home?
You are still going to be the owner of your home, and as such, you will be able to sell it whenever you would like. Be aware you will be required to repay the federally insured Reverse Mortgage loan when you sell the home. Remember that the non-recourse clause states that your federally insured Reverse Mortgage balance can never be more than your home is worth. Meaning, that when you sell your home you should make enough on the sale to pay off the loan, but how much you will have leftover will depend on how much you were able to sell your home for, and how high your loan balance was at the time of the sale.
Can I make payments on the reverse mortgage loan or pay it off early?
There are no prepayment penalties on an federally insured reverse mortgage if you decide to make payments on your loan or if you decide to pay it in full. You will be able to make payments on the loan for most loans but the market offers different products from time to time so it’s important to confirm this with the lender you’re working with to be clear.
Can I own a second or vacation home?
The only condition when thinking about your federally insured Reverse Mortgage is that the home you have the federally insured Reverse Mortgage on must be your primary residence. The definition of Primary residence, for the purpose of this loan, is residing in the home for at least six months and one day a year. So yes! You can own as many other homes as you can afford.
Can I rent out a room or a unit of my home?
If your home has an extra room, a mother in law suite, a cabana, a garage apartment, a basement apartment, a split level apartment, is a duplex, or is a multi-family home you may wonder if you can rent out whatever extra space you have to make extra income. We’re glad you asked…The only requirement is that you maintain the home as your primary residence. For example, if you have a multifamily home and you own 4 units, you can live in one unit and rent out the other three. So YES, As long as you are residing in the home as your primary residence, and are not gone for more than 12 consecutive months, your federally insured reverse mortgage does not prevent you from renting out a portion of your home.
Do I have to borrow the maximum amount that I qualify for, or can I take less?
On any federal insured reverse mortgage you’re never required to take the maximum amount of proceed available to you. In fact you have multiple options for different ways you can choose to receive funds. These included a lump sum at closing, regular monthly payments for a period of time that you pick, a guaranteed payment for life provided your living in the home or a line of credit you can use as you see fit. However the upfront cost associated with the loan are the same regardless of how much you take. So just keep in mind if you planning on only using a small sum of money or keeping the loan for a short period of time this might be an expensive proposition.
Why is a Federally Insured Reverse Mortgage so expensive?
Unlike most conventional loans federally insured reverse mortgages have the added cost of mortgage insurance. Mortgage insurance, or MIP for short, protects you as a borrower in the event the lender defaults. If this ever happens the federal government steps in and ensures you’d always receive the proceeds you were promised to get. Also, equally important, MIP guarantees you that if house is ever worth less the what you owe you or your heirs aren’t personally responsible for the difference. So in general, you may pay more for the loan, but you are getting more than you would if you just got a regular home loan with your funds.
What is a servicing fee?
We suggest asking your lender if they charge a service fee; not all do. There’s a cap on what lenders can charge. A servicing fee is generally the fee for record keeping, sending statements, making distributions and other loan administrative costs. Since each lender is different it’s important to ask whether or not you’ll be paying servicing fees out of your loan proceeds.
Is the interest that I pay on my federally insured Reverse Mortgage tax-deductible?
If you decide to make a payments on your federally insured reverse mortgage, the payments you make will be applied to the balance and will not be separated between the principle balance and the interest like payments are on a traditional mortgage. So while interest could be tax-deductible, the tax wouldn’t be deductible until you pay off the full balance of the mortgage.
Counseling Related Questions
If you are a non-profit company, why do I have to pay?
Just like any other company, we do still have employees to pay and other costs of running a business that we are responsible for paying. You will notice though, that our rate is one of the lowest rates available for counseling.
We accept Visa, Mastercard, American Express, Discover Card, Money Orders or a Personal Check. Appointments are not scheduled until after payment advice is provided.
If you elect to finance your counseling fee, you will be asked for a credit card to hold on file for 90 days while the loan takes time to process and close. If your loan closes before 90 days and we receive payment from your title company or escrow agent prior to then, your card will not be charged. If your loan closes after 90 days and we receive payment from your title company or escrow agent after your card is charged, we will refund the charge we placed on your card. Counseling fees are NOT refundable once counseling is delivered even if you decide not to take a loan.
Why do I have to give you my budget information, I wasn’t told I would have to do this?
HUD has recently required that HECM Counselors collect a budget from all of their clients for statistical purposes and to offer additional program opportunities that families might be eligible for. Counselors submit this information to HUD so that HUD will be able to analyze the figures and get a better picture of who the federally insured Reverse Mortgage Program is helping.
Is ReverseMortgageHelper.org approved by the U.S. Department of Housing and Urban Development (HUD)?
Yes! We maintain approval with HUD, and all of our counselors are certified and maintain their individual certifications by attending continuing education courses, including ethics, as well as, pass a rigorous exam every three years. We are approved by HUD to provide comprehensive housing counseling and housing educational services.
If I decide to go with a different lender or loan officer will I have to do counseling again?
Once you’ve have completed the counseling, your federally insured certificate often times referred to as a HECM certificate is valid for 180 days. Right around six months. You can use the same certificate with a new loan officer for as long as the certificate is valid. If you change loan officers or apply for a new loan after your counseling certificate expires you will be required to re-do the counseling.
As a HUD Approved Counseling Agency, our Reverse Mortgage counselors will discuss the facts of a Reverse Mortgage with you and upon completion of the session will present you with a Certificate of Counseling.
Reverse Mortgages are increasing in popularity with seniors who have equity in their homes and want to supplement their income.
The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA approved lender.-U.S. Department of Housing and Urban Development (HUD)