Reverse Mortgage – Your Questions Answered

By Paulette Wisch, Reverse Mortgage Specialist ~

What is a reverse mortgage?

A reverse mortgage is a loan designed for senior homeowners.  At least one of the borrowers must be 62+ years of age.  It is a loan on your home that does not have to be paid as long as one of the homeowner’s remain in the home.  

What is so unique about this program?

The borrowers are NEVER required to make a payment.  It is a loan in “reverse”.  Instead of making payment, you receive them.

Will this loan affect my Social Security or Medicare?

No, absolutely not.  Even if you are on Medicaid, you can get a reverse mortgage.

How much do I qualify for?

Proceeds are based on the age of the youngest borrower, the value of your home as well as the interest rate.  Old is good as the older you are the more money available.

Will I have to pay an up-front application or appraisal fee?

At Universal Lending you will not have to pay these fees out of pocket; they are included in your loan.

What are my responsibilities?

You and/or your spouse must live in the home and keep the property in good repair.  You also are required to pay taxes, insurance and HOA if applicable, however in some cases, those items can be paid from the loan.

Do I have to own my home free & clear?

No, even if you have an existing loan, reverse mortgage proceeds can be used to pay your current loan and you would never have to make another house payment.

Do I have to qualify?

Yes, FHA requires lenders to do a financial assessment, so the lender will ask for income and credit information.

How are the proceeds distributed to me?

The borrower chooses.  The lender’s job is to create the pool of proceeds and the borrower decides how they want the funds. You can get monthly income, a line of credit or combinations.   At any time, if the plan you have isn’t working you can change it for $20.00.  There is no restriction on use of funds.

Are the proceeds distributed from the loan taxable?

No.  Funds taken are considered “loan proceeds”, not income, and therefore not taxable.

When is the loan due?

The loan is due when you and your spouse no longer live in the home as your primary residence.

Is it possible to leave a debt to my heirs?

No, this loan is “non-recourse” which means no debt left to heirs or estate.

Is this a safe loan?

Yes.  It is an FHA-Insured loan administered by the federal government and they have built in lots of consumer protection.

Who owns my home?

You do.  You do not give up title to your home and with your will in place, you determine who inherits the home on your passing.  Also, if you choose, you can sell and move at any time.

How can I be sure it is right for me?

All customers are required to attend a private meeting with an agency approved by FHA to explain the loan.  If you want your family to attend, it is encouraged.  The meeting, along with discussion with your lender, is designed to give you the facts so you can make an informed decision.  The lender cannot attend and cannot refer you to any one agency.  

Should I be desperate before I consider it?

Many homeowners are using a reverse mortgage as part of a sound financial plan.  A reverse mortgage line of credit can serve as a cash reserve that you can tap as needed.  And the unused line of credit grows like savings.   You can reduce your tax liability by reducing your draws from your IRA or 401K.  Use the tax free proceeds from the reverse mortgage instead.  

Can I use a reverse mortgage to buy a different home?

Yes, you can sell your current home and get a reverse mortgage on a new home and end up with no payments.  Lots of borrowers do this to move closer to their kids or downsize to a home with no yard work.

What questions should I ask a potential lender?

Ask if they process and underwrite their loans in state, you want your paperwork done locally as it is faster.  Make sure your lender has years of experience and ask how long they have been providing reverse mortgages.  Ask if their loan officer will meet you face to face (if you choose) to explain the paperwork.

At Universal Lending, we understand a reverse mortgage is not for everyone.  But if you are shopping for a reverse mortgage, we hope you’ll choose the local team with the most knowledge and experience with this type of mortgage.  In the end, that choice will lead you to Universal Lending Home Loans.  

Paulette Wisch has been a reverse mortgage specialist for 32 years.  She works for Universal Lending Home Loans who opened their doors in 1981; and are still at the same location at Monaco and Evans.  She can be reached at 303-759-7354 or email pwisch@ulc.com.