If you love your home and you want to age in place, a Reverse Mortgage can keep you in the home AND eliminate a mortgage payment forever.

How do they work?

A Home Equity Conversion Mortgage (HECM) is a special type of mortgage that enables homeowners, age 62 and older, to tap into the equity in their home.

Unlike traditional home loans, no repayment of the mortgage is required until you no longer occupy the home as your primary residence. At that time, the mortgage becomes payable. What is borrowed, plus interest, is due to the lender, and any remaining equity remains with the homeowner’s estate/heirs.

What consumer protections are in place?

• New Reverse mortgages are non-Recourse loans - If the house sells for less than the loan balance, the lender will make no claims against your estate, or any of your heirs/beneficiaries’ assets. Guaranteed.
• In the event of a spouse’s death, the other remains protected for life. Even non-Borrowing spouses, below the age of 62.
• Borrowers have no time limit as to how long they can stay in the home.
• All HECM’s are insured through the Federal Housing Administration (FHA)
• Independent third-party educational counseling is required
• At loan maturity, the estate can always purchase the home at 95% of the current value; regardless of what is owed.

Eligibility requirements:

• Homeowner’s 62 years of age or older (If married, at least one spouse must be 62 or older).
• You must live in the home as your primary residence. (6+ months out of a year)
• You must continue to pay for your property taxes and insurance.
• You must keep the home properly maintained.
• There must be at least 50% equity in your home

What types of properties are eligible for a reverse mortgage?

• single family residences,
• townhomes,
• condos, and
• manufactured homes.

What are the Pros and the Cons?

PROs

• Funds are tax free
• There are no limitations to how the borrower may use the funds
• No monthly mortgage payment is ever required
• Homeowners retain Title to the home
• Homeowners keep all future appreciation; equity is not shared
• Fees can be financed into the loan. Zero out of pocket expense required.
• Appreciating lines of secured credit are available. In addition to a Lump sum distribution, a growth line of credit allows a borrower to access an increasing amount of money as the home appreciates. A HECM line of credit and is not negatively affected by housing price fluctuations.

CONs

• Higher fees – You are paying for the guarantee. The mortgage insurance premium collected is significant, but it does give you peace of mind about a worry-free future.
• A Reverse mortgage is not designed as a short-term loan. - While you can refinance out of a reverse mortgage, we don’t recommend using this retirement tool as a temporary loan product.

Frequently Asked Questions:

Do both spouses have to be 62 years old to be eligible? No. If only one spouse is 62 years old you are still welcome to apply. While the loan will solely be in the name of the person who is of age, the younger spouse is still fully protected for life.

Here’s the truth behind reverse mortgage myths:

I heard the bank can take my home away from me!

Not true. You and your family’s estate will maintain 100% ownership of the home. Just like any other mortgage, a lien is placed on the home until the loan is satisfied either by sale or refinance. The bank doesn’t own the house.

My heirs will be responsible for repaying the loan when I die.

Upon your death, your heirs have 12 months to sell your home. After one year, if your family has not purchased the property or arranged a sale, the bank retains the right to facilitate the sale. If the bank sells it for more than what you owe, your heirs will receive 100% of the proceeds. If the sale price is less than the owed balance, your family is completely free from recourse.

The bank will kick out my spouse if I pass away.

Not true! If there is a surviving non-borrowing spouse on title that was disclosed in the underwriting process, the surviving spouse can continue to remain in the home for life and receive the benefits of the reverse mortgage without having to sell the home or pay off the mortgage.

Someone told me that I won’t be able to sell my house.

Not True! When you have a reverse mortgage, you can sell your home anytime. Remember, you are retaining 100% ownership of your home, so you can decide to sell at any time. If you do, your reverse mortgage would be paid off at the closing, just as any other mortgage.

What classes do I need to take?

All reverse mortgage borrowers must also complete the HUD (Department of Housing and Urban Development) counseling class that will give them a certificate of completion. FHA/HUD department loans are government insured and they require everybody, even before the start the application process for a reverse mortgage, to take these classes.

We hoped this helped you develop a deeper understanding of reverse mortgages. If you have questions about this or anything else, give us a call at 602-535-2171 or shoot us an email at team@AZmortgagebrothers.com.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes. Signature Home Loans NMLS# 1007154/ #210917/ #1618695.

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