This is the second in a three part series of frequently asked questions about Reverse Mortgage.  You can find Part 1 here and Part 3 here.  If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Can I get a Reverse Mortgage even if I have an existing mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. The existing loan will be paid off first with the reverse mortgage funds, then the remainder of the funds will be given to you.  This scenario would apply as long as the amount of the reverse mortgage is larger than the existing loan.  For example: if you owe $100,000 on an existing mortgage and you qualify for $125,000 under the reverse mortgage program, under these circumstances you would still have $25,000 left over to do with as you wish AND you would no longer have a mortgage payment.

Another scenario would be one where the mortgage on your house is more than what you qualified for under the reverse mortgage program.  In this situation you would have the option to make up the difference with your own funds between the amount of reverse mortgage you qualified for and the existing loan.  This would allow you to no longer have the burden of a monthly mortgage payment.  Working with a reputable reverse mortgage lender will ensure the most accurate information regarding how an existing mortgage would affect a reverse mortgage and what will be right for you.

What is Reverse Mortgage Counseling? 

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrower to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process.  The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.  Read more about what to expect during reverse mortgage counseling here.

Why not get a home equity loan instead of a reverse mortgage?

Reverse mortgages do not need to be repaid as long as you remain in your home. This allows for a lot of flexibility if you are on a tight or limited budget, or would like to use your funds from a reverse mortgage for specific purposes.

On the other hand, attaining a home equity loan (or a second mortgage) requires you have sufficient income to cover the debt—plus, you must continue to make monthly payments on both any existing mortgage and the new home equity loan. With a reverse mortgage, you do not make monthly mortgage payments and the federally insured loan protects you from foreclosure.

Do I have to pay taxes on the cash payments I receive?

The cash you receive from a reverse mortgage is not considered income, therefore not subject to individual income taxation. But, since you hold the title to your home, you are still responsible for property taxes, insurance, utilities, fuel, maintenance, and other home-related expenses. Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.  Find a whole lot more information about what reverse mortgage holders are still responsible for after obtaining the loan here.

Who is a Reverse Mortgage not right for?

Reverse mortgages are not right for everyone, which makes it even more important that you work with a reputable lender.  A reverse mortgage may not be in your best interest if you intend to leave your home within 2-3 years, if you own multiple homes or investment property, or if you intend to leave your spouse off the loan.  Even if you fall into any of these categories, discuss your situation with a lender before eliminating reverse mortgage as an option.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

This is the first in a three part series of frequently asked questions about Reverse Mortgage.  Find Part 2 here and Part 3 here.  If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Are There Any Special Requirements to Get a Reverse Mortgage?

In order to qualify for a reverse mortgage, you must own your home, be at least 62 years old, have some equity in your home, and meet the income and credit requirements.

How Much Money Can I Get?

In general, the older you are (or the youngest borrower in the case of married couples) and the more valuable your home, the more money you can get.  Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in your home.

Does My Home Qualify?

Eligible properties include single-family homes, 2-4 unit properties, modular homes, condominiums, and townhouses.  This home must also be your primary residence.

What are My Options to Receive the Funds?

Funds from a reverse mortgage can be received all at once as a lump sum, as fixed monthly payments for a set term or for as long as you live in the home, as a line of credit which allows you to draw on the loan proceeds at any time, wrapped into the purchase of a home, or a combination of all these.

How Can I Use the Proceeds from a Reverse Mortgage?

Their are no restrictions as to how the proceeds from a reverse mortgage can be used.  Whether it is to supplement or protect retirement income, to cover your living expenses, to repair/modify your home, to pay for medical expenses, pay off existing debts, or simply do something nice for yourself or others, no one can tell you how you must spend your money.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process.

The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.

Here is what you can expect at your counseling session:

The potential borrower will need to schedule an appointment directly with a counseling agency. The lender does not initiate or take part in the session, but can provide you with resources to seek out a counselor. The session will take place in person or over the phone – although the FHA recommends a face-to-face meeting whenever possible.

Prior to your appointment, the counseling agency will provide you with a packet of information to allow you to prepare for the session. During the session the counselor will discuss your immediate and long-term financial needs, your reasons for seeking out a reverse mortgage, address any questions or concerns you may have, and clearly educate you on the process as well as the pros and cons of a reverse mortgage. Again, they are not there to “sell” you on the product, but to educate instead.

Once you have completed the counseling session, you will be provided with a “Certificate of Completion”. This certificate verifies to your lender that you have completed the counseling session and that you understand the essentials of a reverse mortgage. Your counselor will also follow up with you to ensure you have no further needs, questions, or concerns.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan to learn if reverse mortgage is right for you.