Common Reverse Mortgage Questions
How do I qualify for a reverse mortgage?
To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence.
How much money can I get?
The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.
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, monthly payment, or a combination of all three.
What costs are associated with a reverse mortgage?
The costs of a “forward” loan are very similar to a reverse loan. For example, 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 doc prep fee, title and settlement fees, and other standard closing costs. Monthly servicing fees could apply.
Is it required that I receive counseling before getting a reverse mortgage?
Yes. Counseling is required with an independent third party HUD-approved counselor to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.
Do I get taxed on the money I receive from my reverse mortgage?
The equity in your home is typically considered as loan proceeds and not additional income. Typically the funds from a reverse mortgage are considered tax free. (Borrowers should seek professional tax advice regarding reverse mortgage proceeds.)
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 pay most fees during the course of the loan. Typical upfront costs are for the appraisal and HUD-approved reverse mortgage counseling (some agencies waive counseling fees at their discretion). However, there may be a monthly servicing fee associated with reverse mortgages. For more information on the service set-aside, please talk to your loan officer.