At ORM, our goal is to provide education on this great loan program. We know people have questions, and we have the answers.
Q: Will the lender own my home?
A: No, the lender will not own your home. Just like any other mortgage, with a home equity conversion mortgage, your name remains on the title. You still own your home.*
Q: Do I need to have good credit for a home equity conversion mortgage?
A: There is no credit score requirement. Throughout the loan process, we will look at credit history as part of the financial assessment to ensure you have the ability to pay your property taxes and homeowners insurance.
Q: What if my home sells for less than what I owe on the loan?
A: A home equity conversion mortgage is a non-recourse loan. That means you or your heirs will never owe more than your home is worth. If your home sells for less than what is owed on the loan, FHA insurance pays the difference.
Q: Can I get a reverse mortgage if I already have a mortgage?
A: Yes you can! In fact, many people use their reverse mortgage to pay off their existing mortgage. You can use your new loan to eliminate your current monthly mortgage payment. With a reverse mortgage, you will not be required to repay the loan until the loan becomes due and payable. The loan generally becomes due and payable if you (or an eligible non-borrowing spouse during a deferral period) move, sell the property, or pass away. You remain the owner of the home and you (or an eligible non-borrowing spouse during a deferral period) must continue to pay property taxes, insurance fees, and home maintenance costs.
Q: Are there limits on how I can spend the money from my home equity conversion mortgage?
A: If you have a mortgage, that will have to be paid off first. Any remaining money is yours to use however you wish! If you do not have a mortgage, there are no restrictions on how the money can be used.
Q: Will my children have to pay for the loan if I pass away?
A: Your heirs have a few options. They can sell the home to pay off the loan and keep any remaining money from the sale. They can keep the home. If they decide to keep the home, they can pay 95% of the appraised value of the home or the loan balance – whichever is less. The last option is to turn the loan over to the servicer to sell the property. This typically happens when an heir is not interested in keeping the home and the balance is higher than what the home is worth.
Q: Is this kind of loan typically used as a “last resort” for seniors?
A: Absolutely not! The reverse mortgage program was created for seniors regardless of their situation or income level. Some may use the loan proceeds to pay off debts while others use it to live a more comfortable retirement without a required monthly mortgage payment.* Someone in a good financial position may actually benefit the most from a reverse mortgage.
Q: Who is Eligible for a Home Equity Conversion Mortgage?
A: Homeowners age 62 and older who are able to meet their financial obligations and who have enough equity in their homes to qualify.
Q: Can my family be involved in my decision and the process?
A: Absolutely! We encourage family members to be involved in their loved one’s decision. It’s helpful for the client if everyone involved understands the program and the process. We can include family members on phone calls and send them educational materials.
Q: Can I lose my home because I live longer than expected?
A: No, you cannot lose your home for living longer than expected.
Q: Why are you checking my credit history?
A: Mortgage loans generally require a credit review. A benefit with the home equity conversion mortgage is that there is no minimum required credit score. We review your credit to determine if you are willing and able to meet such financial obligations as paying property taxes, homeowners insurance, and home maintenance costs.
Q: What is Financial Assessment?
A: Financial assessment was put in place by the federal government to add more protection for seniors. The financial assessment process includes analyzing such information as the cost of the property taxes and homeowners insurance, the clients’ credit history, assets, expenses, and income. Going through this process helps borrowers understand their current financial situation and helps lenders determine if the borrower is willing and able to manage their financial obligations. If the borrower does not meet the criteria set forth by HUD in the Financial Assessment guidelines, the lender is required to withhold a Life Expectancy Set-Aside (LESA) from the loan proceeds to be used for payment of property taxes and homeowners insurance.
* Homeowner is responsible for property taxes, homeowners insurance and maintenance of your property.