Reverse Mortgages

This is Derek McGowan with the McGowan Mortgage Team and I'm here today to talk about reverse mortgages. If you've been thinking that now is the time to get a reverse mortgage for yourself, or if you have questions about the reverse mortgage option for your parents, then you want to watch this video. Reverse mortgages are a type of real estate financing, but they work differently from other home loans. A reverse mortgage lets you borrow money from the equity of your house without any monthly payments on the home loan. You still have to pay for your property taxes and your homeowner's insurance, but the mortgage is repaid when the house is sold or the property owner passes away. Many of the rules and standards associated with most home loans simply don't apply for reverse mortgages. Let's look at the basic requirements of the reverse mortgage. The first important requirement is that you can only get an FHA reverse mortgage if you're older than 62. Nearly all reverse mortgages are insured through the FHA. The FHA calls reverse mortgages Home Equity conversion mortgages or HECMs. You largely qualify for a reverse mortgage on the basis of the equity in your home. The amount you can borrow on a reverse mortgage will depend on the borrower's age, interest rate, whether the rate is fixed or adjustable, and the property value. Monthly payments for principal and interest are not required. Borrowers are required to pay for property taxes and homeowners insurance. The loan is repaid when the borrower moves, sells the property or passes away. The FHA backed HECM is a non recourse loan, so the loan is secured by the property's value, not the borrower's assets. So what's the qualification requirements for a reverse mortgage? The amount that will be available for withdrawal on a HECM or reverse mortgage will vary borrower by borrower. It depends on the age of the youngest borrower or eligible non borrowing spouse, current interest rate lesser of the appraised value or hecm FHA mortgage limit or the sales price if there's more than one borrower. No eligible non borrower spouse. The age of the youngest borrower is used and determines the amount you can borrow. You can use a HECM to purchase a primary residence if you're able to use the cash on hand to pay the difference between the HECM and the sales price plus closing cost for the property you are purchasing. There are financial requirements with the reverse mortgage, but they are not as stringent as standard mortgages. Your lender will verify your income, your assets, monthly living expenses, credit history. They will also verify that you have made timely payments on your property. Property taxes, hazard and flood insurance premiums will be verified. You can pay for most of the costs of a HECM by financing them and having them paid for from the proceeds of the loan. Financing the cost means that you do not have to pay for them out of your pocket. The HECM loan includes several fees and charges including mortgage insurance premiums, both an initial and annual premium, third party charges, origination fees, interest servicing fees your lender will discuss. These fees and charges are mandatory. A reverse mortgage is a form of debt that grows every month. So how do you pay it off? First, a reverse mortgage only needs to be repaid when one of these things happens. The property is sold, the borrower moves away, borrower passes away. What if the remaining loan amount is more than the value of the property? An FHA backed reversed is non recourse financing. This means that the debt is secured by the value of the house and nothing else. If the value of the property is not sufficient enough to repay the debt, then the difference is paid by the FHA insurance program. If you're considering a reverse mortgage, your first step will be to speak with a mortgage professional like myself. We can help you understand the reverse mortgage and decide if it is a good option for you. Thanks for watching. This is Derek with the McGowan mortgage.