This article will provide information about reverse mortgages from a Certified Reverse Mortgage Specialist, Richard Woodward. It will include what you need to do to qualify, when you must repay the loan, and what could trigger a foreclosure.
What is a reverse loan?
Reverse mortgages allow older homeowners, 55 and older in some states and 62 and older in Texas, to borrow against their home’s equity.
These loans are special because of their unique nature.
Reverse mortgages offer equity loans that are unique because they pay the borrower either in a lump sum or in monthly payments when refinancing or they allow home buyers to make a large down payment to purchase a home and then no monthly mortgage payments going forward.
How is home equity calculated and what is it?
Home equity refers to the homeowner’s ownership interest in their home. The current market value of the property is used to calculate home equity. Any lien amounts that may be attached to the home is subtracted from the appraised value, and that becomes equity.
What is “HECM” and what are its requirements?
“Home equity conversion mortgage” is “HECM”. This is the most popular type of reverse mortgage and it is insured by HUD as an FHA mortgage.
These requirements are required for a home equity mortgage.
- The applicant and spouse (the homeowner) must be at minimum 62 years of age in Texas. Other states allow reverse mortgages beginning at the age of 55.
- The homeowner must make the home his or her principal residence and live in it at least 181 days of the year.
- The homeowner must either own the house in full or have a low balance on their current mortgage. The homeowner should have roughly 50% equity to qualify.
- With proceeds from the reverse mortgage loan, the balance of the current mortgage may be paid off at closing.
- The borrowers must have at least $581 of residual income to qualify. Pro Tip- assets and available line of credit can be used as income to help qualify.
These are some of the things you should remember before applying for a reverse loan.
When you are considering a reverse mortgage, keep these things in mind:
- To discuss eligibility, financial responsibilities, and other loan options, the homeowner is required to complete an over-the-phone counseling session with a counselor approved by HUD. This is to ensure that the loan officers completely and effectively communicated the nuances of the reverse mortgage.
- There are restrictions on how much the homeowner can borrow, it is just limited to the value of the home and the maximum values assigned by HUD for FHA-insured loans. For 2022 that amount is $970,000. Other reverse mortgage programs can go as high as $3,000,000.
- A reverse mortgage may not be available if the homeowner owes a high percentage of their home’s value with a traditional forward mortgage.
- The homeowner must be able to afford the ongoing property costs, including insurance and taxes, as well as maintenance and repairs.
What are the terms of a reverse mortgage?
Reverse mortgages are subject to several conditions.
- The homeowner must be able to live in the house for the majority of the year.
- It may be considered permanent if the homeowner has lived in a nursing home for more than 12 months. The homeowner might be required to repay the loan.
- Property taxes must be paid on time. This is true even if the homeowner has a deferral. Tax deferrals are not allowed in combination with a reverse mortgage. Failure to pay property taxes on time or keep insurance current can lead to default and possible foreclosure.
- Insurance must be maintained by the homeowner.
- The homeowner is responsible for maintaining the property and paying HOA fees.
What is the difference between a “nonborrower” or a “co-borrower?”
Non-borrower is someone who isn’t listed on loan documents but lives in the house. This person will have to move once the loan becomes due. It will only come due if the borrower(s) leave the home permanently or pass away. Non-borrowing spouses are not allowed in Texas.
Co-borrower, usually a spouse, is someone whose name appears on loan documents together with the homeowner (applicant). The homeowner can pass away and the co-borrower, along with any children or other relatives, may continue to live in the house.
What is the payback terms of the home equity mortgage (HECM)?
The home equity conversion loan (HECM), must be paid in full by the last borrower or eligible spouse.
- The home is no longer their primary residence.
- Paying taxes late
- Failure to keep insurance or
- Refuses to make the repairs that are needed.
What are the fees for a reverse mortgage?
Reverse mortgages can have upfront costs and ongoing costs. Lender fees, upfront mortgage insurance, closing costs, and other expenses must be paid by the homeowner. The Richard Woodward Mortgage Team will allow borrowers to select from several options including options with no origination fees.
How are mortgage insurance premiums calculated?
FHA mortgage insurance is collected at closing in the amount of 2% of the appraised value of the home.
The monthly loan amount is multiplied by mortgage insurance multiplier which currently stands at 0.50%, which results in the monthly premiums.
What are the main causes of foreclosure?
Failure to adhere to the terms of the reverse loan can lead to foreclosure, just like any traditional conventional, FHA, VA or USDA mortgage.
When the homeowner (applicant), is unable to pay his or her mortgage, foreclosures may occur in traditional mortgages but not in reverse mortgages. However, in all cases, the following items must be paid to prevent foreclosure.
- Not paying property taxes.
- Failure to keep insurance.
- If the homeowner is not able to live in the house for the required time which is 181 days of the year.
- If the borrower(s) passes away. The heirs have up to 12 months to refinance or sell the home so that they can keep the remaining equity.
Are there other kinds of loans I should look at?
There are many alternatives to a reverse mortgage, such as second mortgage loans, home equity loans, or just a plain conventional mortgage. The main difference is that you will have to qualify with more stringent standards for income and credit, and you will have to start paying these loans back right away.
If you would like a free consultation about your reverse mortgage options, you are welcome to call The Richard Woodward Mortgage Team at (214) 945-1066 or complete an online secure application now.
The Reverse Mortgage program has changed dramatically in the last couple of years. The NEW Reverse Mortgage is now recommended by many financial planners and licensed professionals due to the recent improvements and protections put in place.
Richard Woodward is a Dallas Texas based licensed reverse mortgage expert with many happy past clients. Let’s talk either face to face or over the phone. Richard will analyze your situation and provide you either a reverse mortgage option or a traditional mortgage option, whichever works best for you.
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free Reverse Mortgage Handbook
A reverse mortgages (also called home equity conversion loans or HECM) enable homeowners age 62 and older to tap into their equity without selling their home (or purchase without making mortgage payments) The lender pays you money based on the equity you’ve accrued in your home; you receive a lump sum, or a monthly payment or a line of credit. Repayment is not necessary until the borrower sells the property, moves into another residence, or passes away. When you sell your home or no longer use it as your primary residence, you or your estate must repay the loan you received from the reverse mortgage plus interest and other finance charges to the lender.
Mortgage payment options are very flexible. If you want to reduce your balance then you may make monthly payments. If you don’t want to make payments, you do not have to make payments. However, you MUST pay your property taxes and homeowners insurance in order to prevent foreclosure just like a regular mortgage.
Call The Richard Woodward Mortgage Team today to receive your free consultation (214) 945-1066. Now offering Reverse Mortgages for purchase or refinance in Texas, Colorado, Oklahoma, and Kentucky.
FHA-insured reverse mortgages are non-recourse loans. You or your heir will never owe more than your home is worth so when the home is sold, you keep any equity. The bank NEVER owns your home- you do – just like a regular forward mortgage. Interest rates are comparable to forward mortgages. Closing cost, when you use The Richard Woodward Mortgage Team, are comparable to forward mortgages as we will waive our origination fees for all loans over $50,000 unless you wish to buy down your interest rate.
A reverse mortgage is available to seniors 62 or older and can enable owners to convert their home equity into cash to meet the financial needs that appear during retirement age. This type of loan can be used to supplement income or to pay for additional cost to become harder to cover after retirement. A reverse mortgage is a loan against your home that you do not have to make payments on for as long as you live in the home. You can make payments if you wish but you are in control.
• Reverse mortgages are a way for homeowners, 62 and over, to access the equity they have in their homes
• You still own your home throughout the entire term of the loan. It is never owned by the bank and never will be unless you don’t pay your taxes, keep your insurance paid, don’t pay your HOA fees, or don’t keep your home in good condition just like a normal mortgage.
• A reverse mortgage can help you access cash based on the value of your home without you having to make monthly mortgage payments and can help you better manage your financial future.
• There are minimal income and minimal credit verification requirements.
Reverse mortgages are ideal for homeowners who are retired or no longer working and want to supplement their income. Interest rates can be fixed or adjustable and the money is nontaxable and does not interfere with Social Security or Medicare benefits. Your lender cannot take your home away if you outlive your loan nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value. A Dallas Texas reverse mortgage can help you live a life more comfortably.
• No monthly mortgage payments are required unless you want to make the payments.
• Loan proceeds may be tax-free (consult a financial or tax adviser).
• You can receive the money in a way that suits your financial situation – lump sum, line of credit, fixed monthly payments – or a combination of any of these options depending on the type of loan you select. Options vary depending on terms. We can provide you with several options and you select the one you qualify for and want.
• May not affect Social Security or Medicare benefits (contact a financial or tax adviser)
• The loan is not due until the last borrower permanently leaves the home for 12 months or more
• Neither you nor your heirs will owe more than your home‘s appraised market value at the time repayment is due
Common Uses of Proceeds
• Deferring payment from annuities or other taxable income sources.
• Making home repairs and improvements.
• Covering medical expenses.
• Establishing trusts.
• Helping to financially support family members (e.g., funding grandchildren’s tuition).
• Paying off loans or bills.
• Maintaining or improving quality of life.
• Something special – buying a new car or taking a vacation.
• Lump Sum -A withdrawal of your available benefit at loan closing (the entire amount or a partial amount), typically to pay off your existing mortgage balance, if any, and to provide cash.
• Fixed Monthly Payments -Tenure: A fixed monthly payment for as long as you remain in the home. – Term: A fixed monthly payment for a specific term that the borrower determines.
• Line of Credit -A credit line the borrower can access at any time. The unused balance has a growth feature, which means the borrower will have access to additional benefits the longer they remain in their home.
• A combination of any of these options
• Partial prepayments allow for increases in available credit
Buy a Home Without Monthly Mortgage Payments
If you are 62 years or older, the Home Equity Conversion Mortgage (HECM) for Purchase Loan can help you buy your next home without required monthly mortgage payments.* The HECM for Purchase is a Federal Housing Administration (FHA) insured home loan that allows seniors to use the equity from the sale of a previous residence or cash on hand to buy their next primary home in one transaction
Customer benefits include:
• Eliminates monthly mortgage payments
• Increases your purchase power
• Preserves your cash
Why Consider A Reverse Mortgage To Purchase A Home. Many home buyers use the HECM for Purchase Loan to:
• Downsize to a smaller, lower maintenance home
• Buy a home closer to family or friends
• Lower their cost of living during retirement
• Enjoy carefree living in a senior housing community
Since monthly mortgage payments are not required, a HECM for Purchase Loan may help preserve your hard-earned savings and improve cash flow. You will continue to own and maintain the title of your home for as long as the property remains your primary residence and you continue to meet the obligations of the loan.
Why Choose Nexa Mortgage - Richard Woodward for your reverse mortgage?
With Nexa Mortgage - Richard Woodward reverse mortgages, you know you’re making the smart choice. Here’s why:
• You will first speak with a government-approved counselor before you even apply.
• Your personal information is private and secure because all of our employees are located in one office here in Texas
• We believe in delivery LOW Cost Options to suit your needs.
I’m Ready To Start the process, What’s Next?
When you work with The Richard Woodward Mortgage Team, you can be assured that we will personally walk you through every step of the reverse mortgage process. Your questions will be answered honestly and directly in plain English that anyone can understand. You can also visit HUD.gov for Frequently Asked Questions.
The Learning Process – Feel free to ask as many questions as you like. We want you to be completely comfortable with us and with the reverse mortgage program. We can prepare a scenario tailored to your specific needs and even show you options for how to take the funds based on your needs and goals.
Counseling – Prior to obtaining a reverse mortgage, you will be required to participate in an informative counseling session. The counseling will be done by a HUD-approved counseling agency. The counselor will go over the features and requirements of a reverse mortgage, answer any questions you may have, and discuss alternatives to a reverse mortgage with you. Upon satisfactory completion, you will be issued a certificate and we can move forward with the next step.
Application and Appraisal – After counseling, you are ready to begin the application process. You will fill out the necessary forms and pay for an appraisal of your home. Relax, we’ll take it from here. Visit our Plano Mortgage office and a face-to-face talk or call for an over-the-phone application.
Processing and Underwriting- Behind the scenes, all the components of the file (appraisal, title work, etc) are assembled and the underwriter reviews the file for final approval. This process takes from 2 weeks to 6 weeks depending on how complicated your application is.
Closing – Once the final approval is issued, you are ready to close. We will schedule a time for you to complete the final paperwork. Once all papers are signed and the mandatory three-day right of rescission has passed, you receive your lump sum, access to your line of credit, or a schedule of monthly payments.
Congratulations! HERE’S WHAT TO DO NOW!
Contact us for a no–cost or obligation consultation. We would be happy to discuss the Reverse Mortgage program with you and assist you with determining if it is the appropriate solution for your personal situation. You can contact Richard Woodward at (214) 945-1066.
A reverse mortgage calculator is a good tool but we prefer to have a conversation with you to give your real facts. Reach out today and get your personalized reverse mortgage proposal.
Revere Mortgage FAQ – Frequently Ask Questions about reverse mortgages.
- What is the downside to a reverse Mortgage? One downside to a reverse mortgage is the cost of the upfront mortgage insurance. However, like a traditional forward FHA mortgage, this insurance protects the homeowner. In the unlikely event that the loan balance exceeds the value of the home at the time it needs to be paid off, the FHA insurance steps in and pays any balance that remains at payoff. The insurance will allow the seller to sell the home for the appraised value and only be responsible for 95% of the balance, the remaining sum will be paid by the insurance.
The fees can be higher as well but we always provide our clients with 4 different options with different fee levels. Reverse mortgage borrowers may select the program that works best for them such as a No Origination option.
- How does a reverse mortgage work? A reverse mortgages (also called home equity conversion loans or HECM) enable homeowners age 62 and older to tap into their equity without selling their home (or purchase without making mortgage payments) The lender pays you money based on the equity you’ve accrued in your home; you receive a lump sum, or a monthly payment or a line of credit. Repayment is not required until the borrower sells the property, moves into another residence, or passes away. When you sell your home or no longer use it as your primary residence, you or your estate must repay the loan you received from the reverse mortgage plus interest and other finance charges to the lender. Mortgage payment options are very flexible. If you want to reduce your balance then you may make monthly payments. If you don’t want to make payments, you do not have to make payments. However, you MUST pay your property taxes and home owners insurance in order to prevent foreclosure just like a regular mortgage.
- Can you sell your house if you have a reverse mortgage? Absolutely, it is just a mortgage like any other with special payment options. If you are ready to sell, just call the loan servicer and ask for a pay off amount. Provide this amount to your Realtor, and they should be able to provide you an expected amount of money you will receive from the sale.
- Is a reverse mortgage a good idea? In many cases yes. Like any other loan, one needs to review all the options. A reverse mortgage is simply a financial tool that can be put to work for you. If you are thinking of selling with just a few years then no, a reverse mortgage is not a great idea. To get the answers you need to discuss your situation with a licensed professional that can provide you a proposal and compare it to your other options. We always provide our clients with all the information they will need to make an informed decision. Just remember, advice from someone with no special training, without access to all loan products, is like asking your hairstylist for investment advice.
- What happens when you outlive a reverse mortgage? You cannot outlive your reverse mortgage unless you live to be 150 years of age as that is the end date for reverse mortgages.
- How much money do you get from a reverse mortgage? It really depends on your age, the principal limit is based upon the youngest homeowner and the appraised value of the home. We can provide you with your numbers within a few moments. Just call (214) 945-1066 with your age, zip code, and the estimated value and we will give you a quote.
- Are heirs responsible for reverse mortgage debt? FHA-insured reverse mortgages are non-recourse loans. You or your heir will never owe more than your home is worth so when the home is sold, you keep any equity. The bank NEVER owns your home- you do – just like a regular forward mortgage. The insurance will allow the seller to sell the home for the appraised value and only be responsible for 95% of the balance, the remaining sum will be paid by the insurance.
- How does a reverse mortgage work when purchasing a home? It works just like a refinance except for the home buyer must make a down payment in the amount of equity needed base upon ones age. Here is our page dedicated to that topic.
- Does reverse mortgage affect Social Security? No, funds obtained already belong to the homeowner and are not considered income.
- Does the bank own the house in a reverse mortgage? No, a reverse mortgage is just like any mortgage. Your home is simply used as collateral, and you hold title and ownership.