Reverse Mortgage FAQ
What is a reverse mortgage?
A reverse mortgage is a U.S. government insured loan that entitles senior citizens 62 years and older the ability to utilize the equity in their homes in order to supplement their retirement income. You can use these funds to take a well deserved vacation, pay medical expenses, invest in home improvements, or simply consolidate some existing debt. There are a variety of ways in which you can receive your funds and best of all, you retain the title to your home.
What is a reverse mortgage?
A reverse mortgage is a U.S. government insured loan that entitles senior citizens 62 years and older the ability to utilize the equity in their homes in order to supplement their retirement income. You can use these funds to take a well deserved vacation, pay medical expenses, invest in home improvements, or simply consolidate some existing debt. There are a variety of ways in which you can receive your funds and best of all, you retain the title to your home.
As of January 1st, 2009 seniors may use a Reverse Mortgage to purchase a home ! This allows seniors to benefit from using less assets to purchase & having NO mortgage payment.
This allows seniors to benefit from using less assets to purchase & having NO mortgage payment.
Eligibility for a reverse mortgage (HECM)
To be eligible for a HUD reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. You must own your home or have paid off approximately half of your mortgage balance. If you do have a mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at the closing (the moment which you sign the legal documents).
There are no income or credit requirements for a reverse mortgage.
Where Does Capital Choice Fit in Getting a Reverse Mortgage?
Capital Choice Financial Services is NOT a mortgage lender. Capital Choice has formed a strategic business alliance for providing mortgage services with one of the best organizations in the country - The ArcLoan Division of Access National Mortgage. Their mission is to provide homeowners and potential homeowners with mortgage strategies which reflect Capital Choice’s standards and integrity. Access National is a publicly held, financially sound national company offering Reverse (and Forward) mortgages in all 50 states. Access is an approved correspondent for Bank of America’s Reverse Mortgage programs.
What is the difference between a reverse mortgage and a home equity loan?
Generally a home equity loan, a second mortgage, or a home equity line of credit have strict requirements for income and creditworthiness. Also, with other traditional loans you must still make monthly payments to repay the loans. A reverse mortgage has no income or credit requirements and instead of making monthly payments, you receive payments.
With a reverse mortgage the amount you can borrow is determined by an FHA formula that considers your age, the current interest rate, and the appraised value of your home. The older you are, the lower the interest rate. The more valuable your home (up to a certain point), the higher the loan amount will be.
As stated previously, with traditional loans you are still required to make monthly payments, but with a reverse mortgage the loan is not due as long as you live in the home. Also, with a reverse mortgage you cannot be forced to foreclose or forced to vacate your home because of a missed mortgage payment. However, you are still responsible for real estate taxes, utilities, and maintenance.
Can you outlive a reverse mortgage?
You cannot outlive a reverse mortgage. As long as at least one homeowner lives in the home (keeping taxes and insurance current) you do not need to repay the loan. Furthermore, you will never owe more than your home's value (a reverse mortgage can not become "upside down").
Estate inheritance
In the event of your death or in the event that you no longer use the home as your primary residence, your estate can choose to convert the reverse mortgage into a traditional mortgage to keep the house or else sell the home to pay the balance (the cash borrowed, interest, and fees).
If the equity in your home is worth more than the amount you owe to the lender, the remaining balance belongs to your heirs. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from your estate to pay off the reverse mortgage.
If the sale of your home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA.
This allows seniors to benefit from using less assets to purchase & having NO mortgage payment.
Eligibility for a reverse mortgage (HECM)
To be eligible for a HUD reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. You must own your home or have paid off approximately half of your mortgage balance. If you do have a mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at the closing (the moment which you sign the legal documents).
There are no income or credit requirements for a reverse mortgage.
Where Does Capital Choice Fit in Getting a Reverse Mortgage?
Capital Choice Financial Services is NOT a mortgage lender. Capital Choice has formed a strategic business alliance for providing mortgage services with one of the best organizations in the country - The ArcLoan Division of Access National Mortgage. Their mission is to provide homeowners and potential homeowners with mortgage strategies which reflect Capital Choice’s standards and integrity. Access National is a publicly held, financially sound national company offering Reverse (and Forward) mortgages in all 50 states. Access is an approved correspondent for Bank of America’s Reverse Mortgage programs.
What is the difference between a reverse mortgage and a home equity loan?
Generally a home equity loan, a second mortgage, or a home equity line of credit have strict requirements for income and creditworthiness. Also, with other traditional loans you must still make monthly payments to repay the loans. A reverse mortgage has no income or credit requirements and instead of making monthly payments, you receive payments.
With a reverse mortgage the amount you can borrow is determined by an FHA formula that considers your age, the current interest rate, and the appraised value of your home. The older you are, the lower the interest rate. The more valuable your home (up to a certain point), the higher the loan amount will be.
As stated previously, with traditional loans you are still required to make monthly payments, but with a reverse mortgage the loan is not due as long as you live in the home. Also, with a reverse mortgage you cannot be forced to foreclose or forced to vacate your home because of a missed mortgage payment. However, you are still responsible for real estate taxes, utilities, and maintenance.
Can you outlive a reverse mortgage?
You cannot outlive a reverse mortgage. As long as at least one homeowner lives in the home (keeping taxes and insurance current) you do not need to repay the loan. Furthermore, you will never owe more than your home's value (a reverse mortgage can not become "upside down").
Estate inheritance
In the event of your death or in the event that you no longer use the home as your primary residence, your estate can choose to convert the reverse mortgage into a traditional mortgage to keep the house or else sell the home to pay the balance (the cash borrowed, interest, and fees).
If the equity in your home is worth more than the amount you owe to the lender, the remaining balance belongs to your heirs. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from your estate to pay off the reverse mortgage.
If the sale of your home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA.