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Frequently asked questions
Frequently Asked Questions
The short answer is, it depends. There are several variables that determine just how much of the home value you’ll be able to access. For instance, the borrowing limit (known as the “principal limit”) can depend on factors such as your age, home value as determined by an appraisal, the amount of outstanding loans against your house, and current interest rate. Your Mortgage Forward representative will calculate this amount based off of a few questions.
The homeowner always maintains the title and ownership of their home, just like a traditional mortgage. You’ll have to meet your loan obligations by keeping current with property taxes, homeowner’s insurance, and home maintenance, as you do now.
Because a reverse mortgage does not require monthly mortgage payments, the loan repayment process doesn’t have to begin until you’re no longer living in the home, or if you do not meet the terms of the loan – which includes keeping current with property taxes, insurance, and home maintenance.
Yes. If there’s an existing mortgage on your home, the proceeds from the reverse mortgage are first used to pay off that loan—and since no monthly mortgage payments are required, you can eliminate that monthly mortgage expense and keep more cash to use as you see fit. You’ll have to continue to keep current with property taxes, insurance, and maintenance.
With a reverse mortgage, your heirs can inherit the house, just as they would with any other mortgage. When the loan becomes due, they can decide how to repay the loan balance. Most often, the home is sold and proceeds are used to repay the lender. If there’s any money left over, it goes to your estate. And unlike a traditional mortgage, a reverse mortgage has non-recourse protection—which means that you or your heirs will never owe more than the home’s value when it is sold.
Reverse mortgage proceeds can be taken as a one-time, tax-free payment, steady, tax-free monthly payments, a line of credit as a “safety net” for future use, or any combination of these methods.
Like traditional “forward” mortgages, your interest rate determines the amount of interest you’ll pay on your loan. And when it comes to reverse mortgage, there are two rate-type products: Fixed rate and adjustable-rate (ARMs). With a fixed-rate reverse mortgage, the interest rate remains the same for the life of the loan, but requires a single lump-sum disbursement at the time of closing. With an ARM product, payment can be received via single lump-sum disbursement, line of credit, term, or tenure options. The annual adjustable rate comes with a periodical change of up to 2% with a lifetime cap rate of 5% over the start rate. Generally, these interest rates are slightly lower than those of fixed-rate mortgages, but offer greater flexibility with multiple payment options. Check with your Mortgage Forward representative who can provide up-to-the-minute rates, and to see what you can qualify for at any given time.
No, reverse mortgage funds are considered non-taxable. What’s more, you can avoid making taxable withdrawals from 401(k) or other retirement plans by replacing the money with a tax-free reverse mortgage.
Yes. While reverse mortgages do not require monthly mortgage payments, you may choose to make periodic payments as often as you’d like. You must keep current with property taxes, insurance, and maintenance. But unlike some other types of loans, with a reverse mortgage there are no prepayment penalties.
The short answer is, you can use the proceeds from a reverse mortgage in any way you wish to meet your financial goals in retirement.
Once you’ve decided that a reverse mortgage is right for you, all borrowers are required to meet with a FHA-approved counselor, either by phone or in person. This is an important step that certifies that you fully understand how a reverse mortgage works before you complete your reverse mortgage application. Plus, it’s a great opportunity to make sure that all your questions have been answered by a third party and that you’re clear on all the details: the process, the financial implications, your options, and more.
The HECM program requires you to meet with a government-approved independent counselor for your protection—so you fully understand the benefits of the program, as well as your responsibilities, to make sure it’s the right option for you.
Once your reverse mortgage closes and funds, your loan will be set up in the servicing system of our end investor. A welcome packet containing a Welcome letter, New Loan Reference Guide, and a Privacy Notice will be sent to your mailing address on file. These documents are mailed in a plain white envelope, so be on the lookout for them to arrive 7-10 days after your loan funds.
From there, you simply receive your funds in the manner you chose, as long as you continue to meet the terms of your loan (keeping current with property taxes, homeowners insurance, and maintaining your home in good repair).
With a reverse mortgage, you’re responsible for keeping current with property taxes, homeowners insurance, and home maintenance—as well as any HOA dues, if applicable.
If your loan is set up with a fully funded Life Expectancy Set-Aside (LESA) account (similar to an escrow account), the Mortgage Servicer pays your property charges from the established LESA. If you have a partially funded LESA, funds are sent to you, so you can pay your local tax office directly.
Each year, around the anniversary of your loan’s closing date, you’ll receive a request to certify your occupancy of the home, and attest that the home is still your primary residence. You can do this:
• By phone
• Online
• By faxing, emailing, or mail (on a specific form that will be provided to you)
If there are repairs required to your home (as listed on a Repair Rider to your loan agreement) and you have a Repair Set-Aside account established to pay for those repairs with reverse mortgage funds, you’re required to complete them by the due date listed on the Repair Rider.
If you selected a term or tenure disbursement plan, each month the Servicing department will send your monthly payment by the first business day of the month. We highly recommend that you enroll in the Electronic Funds Transfer (EFT) process to accept your monthly payments via direct deposit to your bank account.
If you move out or permanently relocate to a full-time care facility, your loan becomes due and payable. But you’ll still have options to avoid foreclosure: you can pay your loan in full, sell your property to repay the full balance, or you may qualify for a short sale. You may also have a deed in lieu of foreclosure option.
If you’re away from home temporarily for more than 2 months, you must notify your reverse mortgage servicer immediately and provide a temporary mail forwarding address. When you return home, remember to change your mailing address back.
As with any loan, your reverse mortgage will have to be repaid when the last living borrower or eligible non-borrowing spouse passes away. Similar to the permanent move-out scenario above, your heirs will have the same options to avoid foreclosure. We encourage you to bring your heirs into the conversation early on, and keep them in the loop through the life of your loan.
Depending on the type of reverse mortgage you have, when your loan becomes due and payable, you or your heirs will have the option to request extensions to allow for additional time to satisfy the reverse mortgage repayment. More information will be provided by your reverse mortgage servicer.
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