- Am I eligible for a reverse mortgage?
- Will I still own my home?
- How do reverse mortgages work?
- What are the benefits of a reverse mortgage?
- How do I get paid?
- How does the loan get repaid?
- Can I lose my house with a reverse mortgage?
- How do I know a reverse mortgage is right for me?
- What is a Counseling Certificate?
For more information, please call David Cohn, Vice President, at (312) 491-7124 or Wayne Landon at (312)491-7206.
To be eligible for a reverse mortgage the youngest person on the title must be 62 years old and own the home with some equity. You do not need any income and there are no other qualification requirements.
You retain full ownership of your home when you obtain a reverse mortgage. As with any mortgage, the lender has a lien against your property. Since you make no monthly payments, the loan balance increases over time. When the home is sold, you or your heirs pay the loan balance and keep the remaining equity. Payments from a reverse mortgage do not affect your qualification for Social Security, or Medicare Supplemental Security Income.
When you get a reverse mortgage, you are obtaining an adjustable rate loan which pays you to live in your home. The amount you receive is based on your age and the value of your property. Changing interest rates will affect the outstanding balance on the loan, but not the amount of the payments you receive. The lower the rate, the older the borrower and the higher the value of the property, the more money you are eligible for. (Guidelines are established by the Federal Government.)
The amount you owe when your house is sold is the total of all the loan advances you received (including any money you borrowed to pay fees to get the loan) plus the interest accrued. When you sell your home, the loan is repaid and any money left over belongs to you or your heirs.
You can never owe more than what your home is worth at the time it is sold. This cap on your loan balance is called a "Non-recourse" limit. It means that the lender, when seeking repayment of your loan, does not have legal recourse to anything other than your home's value. The lender may not seek repayment from your income, your other assets, or your heirs.
You keep ownership of your home. You have easy access to the equity in your home. You receive tax-free income while making no monthly payments. Your interest may be tax-deductible. (Consult your tax advisor.) There is no income or credit verification. The bank has no claim on any assets other than the value of the house.
You can get the proceeds of the loan in one or a combination of ways.
- A lump sum at the time of the loan closing.
- A credit line you can access when you need extra money.
- Monthly payments for a specific number of years (called a term plan).
- Monthly payments which continue as long as you live in your home (called a tenure plan).
When the house is sold, the loan is paid out of the proceeds of the sale. Any money left after the loan is repaid belongs to you or your heirs. If the sale price of the house is not enough to cover the cost of the loan, you or your heirs are not responsible for the short fall. This is called a non-recourse loan. Your other assets (and those of your heirs) are safe.
You cannot lose your home as long as you pay the insurance, real estate taxes, and maintain your home. The only way you can default on the loan is if you declare bankruptcy, abandon the house, or commit fraud or misrepresentation.
If you are trying to decide between getting a reverse mortgage and selling your home to move to a less expensive place, compare the costs of selling your house including the real estate broker fees, moving expenses and setting up a new household to the fees you would pay when getting a reverse mortgage. These fees could include an origination fee, closing costs, a servicing fee and a mortgage insurance premium.
Before the reverse mortgage application is completed, you are required to meet with an independent, approved, reverse mortgage counselor. This counseling session will help you determine whether a reverse mortgage is right for you. The session can be done either in person or on the telephone and family or trusted friends are encouraged to participate. At the end of the meeting, you will receive a Certificate of Borrower Counseling. The average cost of counseling is $125.
To arrange for counseling, please call one of these organizations:
- National Foundation of Credit Counselors (866) 698-6322
- Money Management International (877) 908-2227
- AARP (800) 209-8085
- Ask the counselor to fax the Certificate of Completion directly to David Cohn at (312) 421-9706. You may save a few business days by not having to wait for it to arrive by mail.