reverse mortgages
Would you like to throw away your mortgage payment booklet? Are you looking for a way to finance your retirement? A reverse mortgage, now offered at Independent Bank, might be the perfect solution.
What is a reverse mortgage?
A reverse mortgage is a loan that enables senior homeowners, age 62 and older, to convert part of their home equity into income—without having to sell their home, give up title to it, or make monthly mortgage payments. The loan becomes due when the last borrower (s) permanently leaves the home.
How does a reverse mortgage work?
Reverse mortgages work much like traditional mortgages, only in reverse! Rather than making a payment to the lender each month, the lender pays the borrower.
Homeowners can receive payment in a variety of ways, including: a lump sum payment, monthly installments, a credit line to access cash at a later date or any combination of the three.
The loan must be repaid when the homeowner either no longer occupies the property or sells the home. The total amount owed at the end of the loan equals the cash received from the reverse mortgage, plus interest, monthly service fees and any other accrued costs. A reverse mortgage is a nonrecourse loan. This means that if the property is sold to satisfy the loan, the lender may look only to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value. If the homeowner or estate wishes to retain the home after the loan becomes due and payable, the total amount owed as described above must be paid.
Are reverse mortgage interest rates fixed or variable?
Most reverse mortgages to date have variable rates that are tied to a financial index and will vary according to market conditions. However, Independent Bank also offers a fixed rate Home Equity Conversion Mortgage (HECM) program.
Who is eligible for a reverse mortgage?
Seniors 62 years of age or older may qualify. There are virtually no income or credit qualifications. All liens and judgments must be paid in full at or before closing. The property must also qualify for a reverse mortgage.
How do you determine the amount of cash I am eligible for?
The amount you can borrow depends on several factors, including your age, the type of reverse mortgage you select, current interest rates, the appraised value of your home and FHA’s lending limits for your area. In most cases, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.
What are the uses?
Reverse mortgages offer homeowners financial security by providing a cash flow to offset expenses. Many seniors use their proceeds to pay off existing mortgages, pay for rising health care expenses, make necessary home repairs or simply improve their cash flow. Seniors may use reverse mortgage proceeds for almost any purpose.
What are the benefits?
There are many. Here are a few of the most significant:
- Remain independent. A reverse mortgage allows you to remain in your home and retain home ownership.
- No monthly mortgage payments required. You need not pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home.
- Freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.
Can my current income influence my ability to obtain a reverse mortgage?
No. Since reverse mortgage borrowers need not make monthly repayments, there are no income qualifications.
When will I have to pay the principal and interest costs of this loan?
Your reverse mortgage loan becomes due and must be paid in full when one or more of the following conditions occurs: (a) the last surviving borrower passes away or sells the home; (b) all borrowers permanently move out of the home; (c) the last surviving borrower fails to live in the home for 12 consecutive months; (d) the borrower fails to pay property taxes or hazard insurance; (e) the borrower does not maintain the home in reasonable condition.
What has to be repaid when the loan becomes due?
The reverse mortgage principal, interest charges, monthly service fees and other accrued fees are paid from sale of the house or other assets of the estate when the loan becomes due.
If I take a reverse mortgage, will I have an estate that I can leave to my heirs?
When you sell your home, no longer use it as your primary residence, or the loan becomes due, you or your estate must repay the lender for the cash received from the reverse mortgage, plus interest, monthly service fees and any other accrued costs. Any remaining equity belongs to you or your heirs. If the borrower or estate wishes to retain the home after the loan becomes due and payable, the entire balance must be paid. It’s important to remember that if the home is sold to satisfy the debt you won’t owe more than the home’s appraised value.
Must the heir or the last surviving borrower sell the property to repay the reverse mortgage loan?
No. Repayment of the cash received from the reverse mortgage, plus interest, monthly service fees and any other accrued costs may be accomplished by refinancing the reverse mortgage, or through the use of other assets.
Is a reverse mortgage right for me?
Everyone’s financial situation is different. Homeowners are encouraged to talk to their families about reverse mortgages. If you or your family has questions, they may be addressed with your legal counsel or trusted adviser. Our reverse mortgage specialists are also available to assist with questions.
Common myths about reverse mortgages
Myth: The lender will own your home.
FACT: The borrower retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower. Because the homeowners retain title, they remain responsible for the payment of property taxes, hazard insurance, and maintaining the home in reasonable condition – just as they would with a standard first mortgage or home equity loan.
Myth: A reverse mortgage lender will take my home away if I outlive the loan?
FACT: No they cannot. In fact, you don’t need to repay the loan as long as you or another borrower continues to live in the house as your primary residence and keep the taxes paid, hazard insurance in force and the property maintained.
Myth: There are restrictions on how reverse mortgage proceeds are used.
FACT: You can use the money for almost anything you choose, from daily living expenses, home improvements, healthcare expenses, paying off existing debts, or simply enhancing your retirement years. For many people, the money provides a “financial security blanket,” in case unexpected expenses arise.
It is important to know that with adjustable rate mortgages, an increase in the interest rate could affect the amount of money available to borrow in the future and the amount of money owed when the loan becomes due.
Myth: I must have high income and excellent credit to qualify for a reverse mortgage.
FACT: A reverse mortgage has no income qualifications or credit requirements. To qualify, homeowners must be at least 62 years old, own their own home, and pay all liens and judgments in full at or before closing. Also, the property must qualify for a reverse mortgage.
Information contained on this Web site is intended for general information only. Application documents, disclosures and loan documents will contain complete details.
