What is a reverse mortgage and do I qualify?
Do I qualify for a reverse mortgage?
Is my home eligible for a reverse mortgage?
How much money can I qualify for?
How do I receive my money?
What are the costs?
Do I have to pay any fees to the reverse mortgage lender during the course of my loan?
Do I get taxed on the money I receive from my reverse mortgage?
Why should I choose a reverse mortgage instead of a home equity loan?
Does my house need to be paid off to qualify for a reverse mortgage?
What happens if I outlive the loan? Will I have to repay the lender?
How will this loan affect my estate? How much will be left to my heirs?
Do I need to receive counseling before getting a reverse mortgage?

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What is a reverse mortgage and do I qualify?

A reverse mortgage is a unique loan that allows homeowner(s) to draw on the equity in their home, which is paid to the homeowner(s) in cash. It does not require repayment until the homeowner(s) no longer reside in the property. This federally-insured private loan program was created by the U.S. Department of Housing and Urban Development (HUD) to help seniors meet their financial needs.

Do I qualify for a reverse mortgage?

To be eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have enough equity in the house to pay off any outstanding liens, and your home must be occupied as your principal residence.

Is my home eligible for a reverse mortgage?

Homes eligible for a reverse mortgage include single-family homes, detached homes, townhouses, and two-to-four unit properties that are owner-occupied. Condominiums must be FHA-approved.

How much money can I qualify for?

The amount of money depends upon how old you are at the time of closing, how much your house is worth (or FHA's mortgage limits for your area, whichever is less), and current interest rates. The type of reverse mortgage and the payment options can also affect the amount of money.

How do I receive my money?

There are several different options to choose from: You can take the money in a lump sum, set up a line of credit, a monthly payment, or a combination of all three.

What are the costs?

The costs of a "reverse” loan are similar to a standard home loan. An origination fee is paid to the broker/lender, a MIP (mortgage insurance premium) is paid to HUD on the Home Equity Conversion Mortgage (HECM), an appraisal fee, a flood certification fee, a documentation prep fee, title and settlement fees, and other standard closing costs. (The appraisal fee usually needs to be paid at the time of the appraisal.)

Do I have to pay any fees to the reverse mortgage lender during the course of my loan?

A reverse mortgage was created so borrowers don't have to make payments during the course of the loan. However, there is a monthly reverse mortgage servicing fee, which is built into the loan along with the monthly interest payment.

Do I get taxed on the money I receive from my reverse mortgage?

The equity in your home is considered your money and not additional income. All the funds from a reverse mortgage are tax-free and do not affect regular Social Security or Medicare benefits.* However, since you hold the title to your home, you are still responsible for property taxes, insurance, utilities, maintenance, and other home-related expenses. Interest on a reverse mortgage is not deductible on income tax returns until the loan is paid off in part or in full.

*Note: Borrowers should get tax advice to ascertain how the proceeds may affect other federal or state assistance or medical programs, such as Medi-Cal.

Why should I choose a reverse mortgage instead of a home equity loan?

Reverse mortgages are popular because they pay cash that does not need to be repaid while you remain in your home. On the other hand, obtaining a home equity loan (or a second mortgage) requires you have sufficient income to cover the monthly mortgage payments. With a reverse mortgage, you do not make monthly mortgage payments and the federally insured loan protects you from foreclosure.

Does my house need to be paid off to qualify for a reverse mortgage?

No. You do not need to pay off your home to qualify; however, all existing liens and mortgages must be paid off with the proceeds. Further, you are not required to meet any income or credit criteria.

What happens if I outlive the loan? Will I have to repay the lender?

As long as you or one of the borrowers lives in the home and continues to pay the taxes and insurance, you do not need to repay the loan.

How will this loan affect my estate? How much will be left to my heirs?

Once the last surviving borrower dies, sells the home or no longer resides there as the primary residence, you or your estate are responsible for repayment of the money you received from the reverse mortgage, plus interest and other fees. Any remaining equity belongs to either you or your heirs. A “non-recourse” clause can prevent either you or your estate from owing more than the value of your home when the loan is repaid. If the heirs choose to keep the home, they will have to pay back the full amount of the loan balance.

Do I need to receive counseling before getting a reverse mortgage?

Yes. Prior to applying for the loan, all borrowers must participate in a counseling session with a HUD-approved housing counselor, either in person or over the telephone. This mandatory counseling (for which a fee may be charged) is to protect borrowers from receiving incorrect information about reverse mortgages. Federal guidelines require that the lender must be in receipt of the counseling certificate before an application can be submitted or you incur any processing fees.

Your loan officer will provide you with a list of the available HUD counselors in your area.

A Reverse Mortgage Loan Officer at Bank of Commerce Mortgage can answer all of your questions and assist you with the entire loan process. Call 1-888-488-7899 toll free.