Everything You Need to Know About a Reverse Mortgage

The age old question of reverse mortgages

A reverse mortgage used to be a phrase that left a bad taste in your mouth, but that doesn’t have to be the case anymore. Everything has a time and a place, and a reverse mortgage is certainly no different.

You don’t need to fear a reverse mortgage anymore. It might seem devastating, but believe it or not, the benefits can actually outweigh the cost.

If you’re someone who is on the fence about reverse mortgages, then please pay close attention. As long as you know the facts, you can make an educated and highly lucrative decision.

It’s time to stop listening to your neighbor who knows nothing about finances, and take the necessary steps you need to fully understand how a reverse mortgage works. They’re no longer a last resort option, but a highly lucrative one.

At the end of the day, nobody is going to seize your home if you do it right, and it can definitely be a lifesaver or great leverage for a business opportunity.

So let’s not waste anymore of your precious time, and dive right in. We’ll be showing you the facts, and explain everything you need to know about reverse mortgages.

What is a reverse mortgage?

A reverse mortgage is a loan that is designed for people over the age of 62, and can be used as an additional cash flow vehicle in retirement. The beauty of a reverse mortgage is that it is paid back upon death. They also tend to be referred to as HECM reverse mortgage.

These types of loans are designed to use the equity of your home as collateral. This means that the value of your home, after you pass away, is what will be used to pay back the loan. Also, you should know that this is different from a home equity loan, because you won’t need to make mortgage payments with a HECM based loan.

Who is eligible?

Most people who are over the age of 62 are eligible for this type of loan. The youngest person on the loan must be at least 62, but you can apply at anytime during your retirement. You still need to make sure you’re financially eligible through the standards HUD puts out.

When is it paid?

A reverse mortgage is paid back when you pass away. The loan is payable by your estate, and the equity of the home is used to pay off the remaining balance on the loan. This is a good thing, because the value of a home usually goes up over the years to help offset this. Plus, believe it or not, personal assets are not liable.

How can I take distributions?

There are 4 primary ways that you can get paid, and they all make sense depending on the situation.

  • You can take out a lump sum of funds
  • Monthly income payments for as long as you live
  • You can choose to get monthly payments for a set term
  • You can choose a line of credit that you can draw from until it’s empty
  • Plus, believe it or not, you can actually combine some of these options

Everything about a reverse mortgage is flexible, and once you keep reading, you’ll question why people used to despise them so much.

So let’s take a look at how they can help you down below.

How it could help

This is a loan that is designed for those who are in their retirement years. At the end of the day, unless your Bill Gates, everyone needs a little bit of help in retirement.

This is where the reverse mortgage loan comes in.

The loan is designed to be paid in either a lump sum, a designated cash flow, or even a line of credit. Plus, believe it or not, the value of the loan can actually increase overtime. This is due to the fact that the value of your home will likely increase over the course of 20 years.

Why is it good for retirement?

The loan wouldn’t only be available to those over 62 if it wasn’t a hidden gem. There is a reason you have to wait so long to get one. Trust us on that one.

It is good for retirement for a few reasons, and don’t worry, we’ll take a quick look at all of them

People outlive their money

It is no secret that we’re starting to live longer. A time where people only used to make it to 70 or 80 is over. There are literally people over 100 walking around out there. If you want to make sure you have enough cash flow to retire for 30 years instead of 20, a reverse mortgage could be a real life saver. Even as a line of credit, it can help you stay in your home instead of being forced out.

If you’re someone who is worried about the future, or is nervous about having enough money to sustain you into your 90’s, a reverse mortgage can be a great option to help ease your mind.

It negates your mortgage payment

Not everyone is able to pay off their mortgage before retirement comes knocking on the door. That is totally okay, because a reverse mortgage can help relieve you of some of the more demanding payments you might have.

People used to believe that if you still had a mortgage you could not take out a reverse mortgage on your home. This couldn’t be more far from the truth, and at the end of the day, having no mortgage payment in retirement is a real lifesaver.

If you’re someone who is worried about paying their mortgage in retirement, then a reverse mortgage might be right for you. It can help reduce some of that stress you might have, because you won’t have to pay the mortgage anymore.

It can work as a retirement supplement

Everyone thinks that they’re all set for retirement, but most of the time that’s sadly not true. A reverse mortgage can actually work as a supplement for your retirement plan, and we’ll show you exactly why.

Most people don’t know this, but the longer you hold off on taking government mandated contributions (like social security), the more money you’ll receive in income. If you’re social security income is only $2,000 when you’re 62, it could actually be upwards of $3,000 if you wait until you’re 70.

This could be a huge game changer, because it can help you maintain your bills longer, utilize your IRA accounts more effectively, and help you survive the later years of retirement. If you’re still on the fence, think of a reverse mortgage as a supplement.

You can use the line of credit, or take an income distribution, as a way to extend the life of your other retirement plans. You won’t need to worry about longevity with a reverse mortgage.

It can help you retire

Did you know that half of families approaching retirement age have only $5,000 saved? Well, believe it or not, that’s a scary fact. Unfortunately, not everyone is able to save the money they need for retirement. You only get one shot at this, so you need to make sure you do it right.

This is where a reverse mortgage can be a lifesaver, because it can free up the cash you need to finally retire. You don’t need to work until you’re dead, you just need to make sure you do it the right way. If you’re short on funds for retirement, a reverse mortgage might be an excellent option.

Why there is a bad stigma about reverse mortgages, and why it’s a myth

In the past these types of loans used to be looked at as a last resort. Even 20 years ago, the outlook was completely different. People really had no idea how they worked, or who they were for. People also did understand the difference between a reverse mortgage or a home equity loan.

Why were people scared?

People were mainly scared due to the fact that you’re borrowing against the equity of your home. This had people nervous about banks coming in and taking their property.

Luckily, it is very difficult for the bank to take over your home, and they would need you to pass away, leave home entirely, or have the last living heir pass away. The only time you need to pay this back is when you pass away, which makes it a no brainer if you need cash.

People were also worried, because of the word loan. Any type of loan has received a lot of abuse over the past decade or so. While some loans might be out to get you, a reverse mortgage does no such thing. It is paid back after you pass away, and the value of the loan can actually go up. It is tied to your equity, so it can be quite advantageous in this sense.

If you do the research, and make sure you understand the purpose of the loan, it does not have to ruin. While it used to be a last resort in the past, a reverse mortgage can be a lifesaver for those in retirement.

It’s really a double win if you do it correctly

Recap

Sure, a reverse mortgage is a huge decision, but it doesn’t need to keep you up at night. You just need the right information to make a truly informed decision, and you’ll find that there is nothing to worry about.

Now that you know the facts, hopefully you can make a truly informed decision. Reverse mortgages have received a bad reputation over the years, but they can truly play a huge part in anyone’s retirement plan.

A reverse mortgage can be a make or break, and can help make sure you never outlive your money. Nobody wants to move back in with their kids right? A reverse mortgage can definitely help you prolong your retirement, and keep you self sufficient.

You should definitely consider learning more, or at least looking into a consultation. Not only will it help you better understand a reverse mortgage, it will also peak your interest.

The myth has been busted, and we laid the facts out for you.

The question is: are you ready to learn more? It’s time to step down off that fence, and make that crucial decision.

Reverse Mortgage Refinance – HECM to HECM

If you have had your reverse mortgage for at least 18 months, you may be eligible for a reverse mortgage refinance. Refinancing your reverse mortgage can have a lot of benefits, as a reverse mortgage refinance can be used to increase the amount of money that  you have available or to lock in a lower rate. Since every financial situation is unique, it is not possible to make a blanket recommendation about refinancing a reverse mortgage, but we can provide you with some of the factors that could influence your decision.

Why is a reverse mortgage refinance a good idea?

Some financial reasons that could make a reverse mortgage refinance a good idea for you are:

  • Interest rates are lower
  • Property values have increased
  • The principal limit factor has increased

There are other non-financial benefits to refinancing the reverse mortgage, too, like being able to name your spouse on the loan, and being able to change the type of reverse mortgage (this is true if you have a private reverse mortgage and would like to switch to the HECM program).

A reverse mortgage refinance has closing costs associated with it, but these costs can be paid out of the loan proceeds, which means that the refinance can come at no out of pocket cost to you.

If you are looking to refinance your reverse mortgage, there are some requirements that must be met:

  • 18 month waiting period – You can only refinance your reverse mortgage once every 18 months.
  • “Net tangible benefit” – This is a fancy way of saying that the reverse mortgage refinance must benefit you in some way
  • 5:1 loan amount increase to closing costs ratio – This requires that the loan amount increase be at least 5 times the closing costs you pay. For example, if you pay $500 in closing costs, you would have to receive $2,500 or more in additional funds.

The reverse mortgage refinance option has become extremely popular. Throughout the United States, thousands of reverse mortgage holders choose to refinance their reverse mortgage every year.

Why might a reverse mortgage refinance not be for me?

If you are happy with the current state of your reverse mortgage and are not looking for any additional cash out, then it may not make sense to refinance your reverse mortgage. Or, if you are looking to preserve the equity in your home, this program may not be right for you.

Many reverse mortgage holders, however, understand that they may not have a lot of equity in their homes, and they are okay with that because they can continue to live in their homes. This is why the reverse mortgage refinance is such a popular option.

One final reason that a reverse mortgage refinance may not be for you is if there is not a large benefit to you. Even if the closing costs are low but the benefit is only a few hundred dollars, refinancing your reverse mortgage may simply not be worth the time that is required.

Reverse Mortgage FAQ

Reverse mortgages are not always the easiest financial products to understand. For this reason, we’ve compiled a guide full of common questions relating to reverse mortgages. This reverse mortgage FAQ is a great guide for anyone who might have a few questions that are not yet answered. Also, if you have a question about reverse mortgages, feel free to ask it by contacting us, and we will be sure to answer it below.

Proceeds from a Reverse Mortgage – Reverse Mortgage FAQ

“How much money can I get out of my reverse mortgage?”
The specific amount of money that you are able to get out of your reverse mortgage depends on your age, the amount of equity in your home, and the value of your house. Since these factors differ from person to person, it can be difficult to give a one-size fits all answer. For this reason, we recommend that you use our Reverse Mortgage Calculator to get a better understanding of the amount of money that you may be able to take out from your reverse mortgage.

“What if I do not pay my existing mortgage?”
With a reverse mortgage, your existing mortgage is paid off via the proceeds from the reverse mortgage. This means that you would never have to worry about making another mortgage payment again. The only thing you would be responsible for are your property taxes and homeowner’s insurance.

“How long does it take to receive my funds?”
Once you begin working with a lender, you will be able to receive your funds pretty quickly. However, getting your reverse mortgage funds is a two way street, as the lender will need information from you, and the faster that you are able to provide the information to your lender is the faster that you will be able to get your reverse mortgage proceeds. From your first phone call to closing can take from 14 to 45 days, with most cases leaning closer to the 14 day mark, but every case is different.

“What if my mortgage balance goes up?”
Due to the way a reverse mortgage works, the old mortgage will be paid off, so this balance will decrease. The balance for the reverse mortgage will grow, and this is due to the interest being added to your reverse mortgage. If you do not want the balance to grow, you have the option to pay off the interest, but this is completely optional and not necessary.

“What can I use the money from the reverse mortgage for?”
Whatever you would like! Reverse mortgages are extremely flexible, and you can use the money from your reverse mortgage for anything from a home improvement to paying off medical bills to taking a vacation. Additionally, the money is yours, you are under no obligation to spend it in any particular way!

“How much do I have to pay to get a reverse mortgage?”
You will not incur any out-of-pocket costs. There are some costs associated with the reverse mortgage, but the costs are paid for out of the loan proceeds. However, these costs are legally capped to ensure that you are not paying too much for a reverse mortgage.

Qualifications and Requirements for a Reverse Mortgage – Reverse Mortgage FAQ

“Does my home qualify for a reverse mortgage?”
In most cases, yes! While a full appraisal is a required part of the reverse mortgage process, most homes are able to pass and be used for a reverse mortgage.

“What are the requirements for a reverse mortgage?”
There are not a lot of requirements. You must be a homeowner over the age of 62, intend to continue living in your house, and have enough equity in your house for the reverse mortgage. There are no medical or financial requirements that can stop you from getting a reverse mortgage.

“Can the bank/lender take away my home?”
The bank or lender is not able to take away your home. With a reverse mortgage, you do not sign your home over to the bank. You continue to retain title to the house, so you are the owner, just like a traditional mortgage.

Taxes and Benefits for Reverse Mortgage Holders – Reverse Mortgage FAQ

“Do I lose my social security or medicare benefits if I get a reverse mortgage?”
No, a reverse mortgage will not cause you to lose your social security or medicare benefits. However, you will need to use the proceeds from the reverse mortgage before one month. After this period, they will count as an asset if they simply sit in a bank account.

“Will I be taxed on the money I get from my reverse mortgage?”
No! Since a reverse mortgage is a loan advance, it is not actual income, and it is not taxed.

Advising for a Reverse Mortgage – Reverse Mortgage FAQ

“Why might a reverse mortgage be a good fit for me?”
A reverse mortgage might be a good fit for you if you have a lot of equity in your home, are over the age of 62, are able to meet the requirements, and are interested in supplementing your current income with additional proceeds.

“Why might a reverse mortgage not be right for me?”
A reverse mortgage may not be the right choice for you if you are looking to leave your home to your heirs or plan to move out of your house in the next two years. In this case, there are likely financial products that would be more applicable to your situation, and we would recommend speaking to a financial advisor or financial planner to discuss options.

Thanks for reading our Reverse Mortgage FAQ and feel free to let us know if you have any questions about reverse mortgages.

Reverse Mortgage Facts

Reverse mortgages have become a popular financial product for homeowners over the age of 62. Reverse mortgages allow homeowners to take advantage of the equity that they have built up in their home and begin receiving payments. Planning for retirement can be difficult, and a reverse mortgage is a great way to aid your retirement planning. In fact, one in three retirees get 90% or more of their monthly income from social security payments, according to a study by Boston College. A reverse mortgage can supplement social security income while still living in your home. Below are some common reverse mortgage facts and common misconceptions about reverse mortgages.

Reverse Mortgage Facts

These are reverse mortgage facts that apply to all people who take out a reverse mortgage loan:

  • You do not have to pay back your reverse mortgage. Your reverse mortgage will not have to be paid back until you move away from the home or pass away.
  • You get most of your home’s value. If you have paid off at  least half of your mortgage, you are eligible to receive a large part of your home’s value from the reverse mortgage.
  • You can get more money out of your reverse mortgage as you age. As you get older, the amount of money that you can borrow increases.
  • You can never owe more than the value of your home. If your home is valued at $200,000 and the amount owed is $250,000, no one will owe the additional $50,000.
  • You can always refinance. After a year and a half, you are able to refinance your reverse mortgage for a lower interest rate. This would allow you to tap into additional equity in your home and save money on interest costs.

Interested in a reverse mortgage? Find out how much you stand to receive with our reverse mortgage calculator.

Common Misconceptions About Reverse Mortgages

  • “The lender can take your house while you are living in it.” In most reverse mortgages, the lender does not have the right to take away your house while you are living in it. You would still retain the title to your home.
  • “Interest rates on reverse mortgages can be higher than interest rates for traditional mortgages.” Interest rates depend heavily on credit scores. By having and maintaining a good credit score, you are able to take advantage of better interest rates than a borrower with a worse credit score. A borrower with good credit can actually get better interest rates on a reverse mortgage than a borrower with poor credit can get on a traditional mortgage.
  • “Reverse mortgages are loans of last resort”. While some people do use reverse mortgages as a last resort, they are not intended for this purpose. Rather, they are useful and important planning tool for homeowners over the age of 62.
  • “Reverse mortgages are full of fees and additional costs”. Reverse mortgages come with a few fees, but the fees associated with reverse mortgages are governed by law. Legally, the fees charged cannot exceed 20% of the amount of money that you will receive.
  • “You must own your home free and clear to qualify”. Contrary to popular belief, you do not need to have full ownership of your home to qualify for a reverse mortgage. You do need to have enough equity in the home to be able to pay off your first mortgage with the proceeds from the reverse mortgage. This helps borrowers free the money that would otherwise go to a monthly mortgage payment.
  • “The lender owns your home”. Similar to a traditional forward mortgage, a reverse mortgage is secured by a lien on the property, so you retain the title to the home. As long as you continue to maintain the home, pay property taxes, and insurance, you will continue to own the home.

Additional Resources

How a Reverse Mortgage Works

Are you uncertain about how a reverse mortgage works? Maybe you have heard people talking about a reverse mortgage, but you might still be wondering how the whole process works.

How a Reverse Mortgage Works

A reverse mortgage is a home equity loan designed for older homeowners and does not involve monthly mortgage payments. Instead of requiring monthly mortgage payments, the existing equity in the home is used to pay the borrower. Reverse mortgage loans will continue to pay the borrower until they move out of their home or pass away.

Reverse mortgages are an excellent way to supplement retirement income. Reverse mortgages are also extremely flexible, allowing borrowers to receive their money as a lump sum, a steady stream of monthly payments, or as a line of credit that borrowers can tap into as they need. Since reverse mortgages are so flexible, they have become a popular and useful tool for seniors planning their retirement.

There are several different types of reverse mortgages, but the most popular one is a federally-insured reverse mortgage known as HECM. These are loans designed for borrowers over the age of 62 and allow them to use their home equity to receive money, all while living in their house.

How can a reverse mortgage help me?

Reverse mortgages are able to help a variety of seniors, and they can be a useful retirement planning tool. Many people who benefit from a reverse mortgage:

  • Want to remain in their home
  • Are able to maintain their home, pay their property taxes, and insurance
  • Want to be able to supplement their existing income
  • Want to eliminate their existing mortgage
  • Want to improve their existing monthly cash flow
  • Can use the money for anything they want

Reverse mortgages are useful for people who wish to have money set aside for a rainy day or for people who may want to pay off debt like medical bills. Reverse mortgages are also great for people who want to make an improvement to their home.

Why might a reverse mortgage not be for me?

While the versatile option of a reverse mortgage is great for many people, reverse mortgages are not for everyone. Reverse mortgages are not a great option for people who:

  • Do not have significant equity built up in their home
  • Do not plan to live in their house for more than 12 months
  • Are not able to pay property taxes, homeowner’s insurance, or keep the home in good condition

How much money can I get from a reverse mortgage?

There are several factors that help determine the amount of money you are able to receive through your reverse mortgage. For the best estimate, use our free Reverse Mortgage Calculator.

These are the key factors that influence the amount of money you will be able to receive through a reverse mortgage:

  • Age (or, if you are married, the age of the youngest spouse) – The older you are, the more money you can receive.
  • Value of the home – The more valuable your house, the more money you can receive.
  • Interest rate – The lower the interest rate, the more money you can receive.
  • Mortgage balance – If you have a mortgage, the lower the balance on the mortgage, the more money you will be able to receive.

How does a reverse mortgage work?

The process to get a reverse mortgage is relatively simple. Below is a simple checklist to help you get started.

  • Find out how much money you can receive from a reverse mortgage with our Reverse Mortgage Calculator.
  • Get a free information kit to learn more and speak with lenders
  • Request a call from a lender and get a proposal
  • Complete required HECM counseling
  • Complete a loan application and appraisal
  • Start receiving your money

Reverse Mortgage Pros and Cons

A reverse mortgage has the potential to be a great source of income providing guaranteed funds for the future, and it may even become an integral part of your retirement plan. Reverse mortgages, however, do not always work for everyone, so it is important to understand the reverse mortgage pros and cons. This webpage is a great place to start to gain a better understanding of whether a reverse mortgage is the right option for you.

Pros of a Reverse Mortgage

  • Reverse mortgages can supplement the income source of homeowners age 62 and older.
  • You can live in your home and continue to hold the title to the home.
  • Loan proceeds can be used for whatever you want. Many people simply supplement their income, but some use the proceeds to complete home renovations, pay for tuition, and many other uses–after all, the money is yours to use as you wish.
  • Reverse mortgages are flexible. You can take the funding as a single payment (‘lump sum’), as a line of credit that you can use as you need, or as a monthly payment for however long you like. You also have the option to use a combination of these choices.
  • The funds that you receive from your reverse mortgage can actually be used to pay off an existing mortgage. While a reverse mortgage will place a lien on the home, you are never required to make a single principal or interest payment. This means that you will never have to make another payment on your existing mortgage.
  • There are no payments to be made for a reverse mortgage. As long as you pay your property taxes, keep homeowner’s insurance, and maintain the property, you will never have to make a payment.
  • Closing costs and fees can be paid from the proceeds of your reverse mortgage, so there are virtually no expenses associated with the loan closing.
  • The money from a reverse mortgage loan is generally not considered to be taxable income. Since reverse mortgages are considered to be loan advances, they are not taxable. This means you will not have to pay taxes on this money.
  • A reverse mortgage does not have any effect on Social Security or Medicare benefits, so you can continue to receive the same benefits you receive today.
  • Reverse mortgage loans are non-recourse loans, so neither you nor your relatives will have to pay any amount of the mortgage that exceeds the value of your home. This means that if your reverse mortgage balance is $120,000 and your home is valued at $100,000, you or your relatives are not liable for the excess $20,000.
  • Reverse mortgage loans can be refinanced to access more proceeds. As you age, you are able to access more of the home’s value. Additionally, as your home increases in value, you are able to access even more money.
  • After the loan has been paid back, you or your heirs will own the remaining equity in your home.

Cons of a Reverse Mortgage

Although there are many pros to a reverse mortgage, there are some cons to a reverse mortgage as well. Now for the cons section of reverse mortgage pros and cons:

  • The balance on the loan increases over time as interest on the loan accumulates.
  • As home equity is used, there are fewer assets remaining for your family. You can still leave the home for your family, but they will need to pay off the remaining balance on the reverse mortgage. Often the loan balance is repaid by selling the home, but the balance can also be repaid by a traditional mortgage loan.
  • The fees associated with a reverse mortgage can be higher than a traditional mortgage. However, lower-cost reverse mortgage options do exist.
  • The loan is due and needs to be repaid when it matures (the last surviving borrower passes away, the borrower no longer lives in the home, or if the borrower leaves the property for more than 1 year). The loan can also become due if the homeowner does not pay property taxes, homeowner’s insurance, or allows the property to fall into disrepair.

Conclusion: Reverse Mortgage Pros and Cons

The reverse mortgage pros and cons are many. It is important to work with your lender to determine how to mitigate any issues associated with a reverse mortgage. Knowledgeable lenders are able to help reverse mortgage holders deal with any issues and help a reverse mortgage successfully fit into your retirement plans. Learn more

Maryland Reverse Mortgage

What is a reverse mortgage?

A reverse mortgage is a special type of loan for homeowners over the age of 62. A reverse mortgage allows homeowners to stop making mortgage payments and start receiving money for the equity that homeowners have built up in their home (generally, this equity is built through mortgage payments). This means that the money can instead be used for other purposes, like supplementing income, paying for expenses, complete home improvements, or any other purpose. Read more about reverse mortgages →

Reverse Mortgage for Maryland Residents

Increasing home values in the state of Maryland make reverse mortgages particularly desirable for seniors residing in Maryland. The National Reverse Mortgage Lenders Association recently found that homeowners 62 and older have seen their home equity increase by 3.1% in first quarter of 2017. The increase in equity allows seniors to get more money out of their reverse mortgage than they would otherwise be able to.

Finding a Reverse Mortgage Lender in Maryland

Maryland is home to many different reverse mortgage lenders that are able to provide diverse solutions. Recognizing that homeowners and financial situations are different, lenders are able to create loan packages that may be able to help you and your situation. Get a no obligation information kit for Maryland residents →

Maryland Reverse Mortgage Counselors

Prior to taking a completed loan application, seniors must complete a free reverse mortgage counseling session with an approved counselor to ensure that they understand the benefits and drawbacks to a reverse mortgage. Below is a listing of counseling agencies:

Name Agency ID Address Phone Web Site
ASIAN -AMERICAN HOMEOWNERSHIP COUNSELING INC. 80375 12320 PARKLAWN DRIVE
ROCKVILLE,  MD  20852-1726
(301) 760-7636 http://www.aa-hc.org
CECIL COUNTY HOUSING AGENCY 84087 200 CHESAPEAKE BLVD STE 1800
ELKTON,  MD  21921-6682
(410) 996-8216 http://www.ccgov.org/dept_housing/index.cfm
DRUID HEIGHTS COMMUNITY DEVELOPMENT CORP. 80763 2140 MCCULLOH ST
BALTIMORE,  MD  21217-3529
(410) 523-1350 http://www.druidheights.com
FREDERICK COMMUNITY ACTION AGENCY 81056 100 S MARKET ST
FREDERICK,  MD  21701-5527
(301) 600-1506 www.cityoffrederick.com/fcaa
GUIDEWELL FINANCIAL SOLUTIONS, A.K.A CCCS OF MARYLAND AND DELAWARE, INC 84495 2ND FLOOR
757 FREDERICK RD
BALTIMORE,  MD  21228-4500
(443) 451-1689 http://www.guidewellfs.org
GUIDEWELL FINANCIAL SOLUTIONS, INC 90302 757 FREDERICK RD, 2ND FL
BALTIMORE,  MD  21228-4500
(410) 747-2050 n/a
HARFORD COUNTY HOUSING AGENCY 80331 15 S MAIN ST STE 106
BEL AIR,  MD  21014-8723
(410) 638-3045 http://www.harfordhousing.org
HOMEFREE – U S A 80816 3RD FLOOR
6200 BALTIMORE AVENUE
RIVERDALE,  MD  20737-1054
(301) 891-8400 https://HomeFreeUSA.org
HOUSING INITIATIVE PARTNERSHIP, INC. (HIP) 81843 SUITE 555
6525 BELCREST ROAD
HYATTSVILLE,  MD  20782-2003
(301) 699-3835 www.hiphomes.org
SOUTHEAST COMMUNITY DEVELOPMENT CORPORATION 81066 SUITE 200
3323 EASTERN AVE
BALTIMORE,  MD  21224-4109
(410) 342-3234 http://www.southeastcdc.org
WASHINGTON COUNTY COMMUNITY ACTION COUNCIL (WCCAC) 81797 117 SUMMIT AVE
HAGERSTOWN,  MD  21740-5508
(301) 797-4161 http://www.wccac.org

*This list is updated periodically. It is recommended to check with the HUD website for any other companies.

Process To Get a Reverse Mortgage

By now, you’ve done your homework. You’ve read the ultimate reverse mortgage guide, and you’ve determined that a reverse mortgage is a good idea for you and your family. Now, it’s time to get started with the reverse mortgage process itself.

For most people, the complete process can take between 30 and 45 days, but the reverse mortgage process can be done at your own speed. You can move things along faster, if you would like to, and you can move things along slower, if certain elements take longer. Generally, the more willing and dedicated that the reverse mortgage holder is to the process, the faster the process can go on.

Step 1: Reverse Mortgage Counseling

The first step is to undergo reverse mortgage counseling. This is a requirement by Housing and Urban Development (HUD), and you must be able to submit a signed Home Equity Conversion Mortgage Counseling Certificate. Counseling can be completed online, via phone, or in person. Many national and municipal groups are able to provide these counseling services at a low cost.

Step 2: Complete a Loan Application

The loan application allows the lender to begin the process of preparing your reverse mortgage from their end. With the help of your loan officer, you will be asked some basic questions about your home, tax and insurance status, and yourself. The loan application is not binding and it can be withdrawn or cancelled at any point along the way.

Step 3: Home Appraisal

Next, the lender will order a home appraisal to verify the market value of your home. The reverse mortgage appraisal will be completed by a Federal Housing Administration appraiser, and it must comply with the guidelines set out by the FHA.

Step 4: Underwriting

Underwriting primarily takes place on the lender’s end, and in this phase, the underwriter reviews all of the information and documentation that has been provided. The underwriter closely reviews everything to ensure that there are not any problems or conditions prior to the loan closing. If there are any conditions, they can be resolved, and a final closing can be set up.

Step 5: Loan Closing

The final step of the reverse mortgage process is the easiest. A notary or an attorney will meet with you to sign the closing documents. The reverse mortgage holder will have the opportunity to check over all facts and figures to ensure that everything is correct.

After the loan has been closed, the reverse mortgage holder has up to three business days where they can cancel the reverse mortgage without any penalty. This period is known as the “right of rescission”. Once the right of rescission period has passed, the title company will issue a check, wire the funds, or set up the line of credit for the reverse mortgage holder’s account. After this point, the reverse mortgage is active, and the reverse mortgage holder can start to use the proceeds from their mortgage–whether they want to do home improvements, supplement their savings, or use the proceeds however they want.

What is a reverse mortgage?

You might be asking: “What is a reverse mortgage?” A reverse mortgage is a loan for homeowners over the age of 62, and it requires no monthly mortgage payments. A reverse mortgage has the key benefit of allowing homeowners to access the equity that they have earned in their home, and it eliminates monthly mortgage payments. This means that you may be able to use part of the equity in your house to increase your income, pay for expenses, complete home improvements, or use it however you wish.

What is a reverse mortgage?

An easy way to think about a reverse mortgage is to compare it to a conventional mortgage. In a conventional mortgage, a homeowner makes a monthly payment to their lender. In a conventional mortgage, each payment increases the equity in the home. In a reverse mortgage, each payment to you draws upon the equity in the home, providing access to cash that had been tied up in equity. Without ever selling your home, you can access the equity stored in the home.

Since a reverse mortgage is a loan, it must eventually be repaid. Most reverse mortgage loans become due when the homeowner sells the home or passes away, but borrowers always have the option to pay off the loan at any time that they wish. Reverse mortgages are designed so that the amount that is owed cannot be greater than the value of the home. For example, if a reverse mortgage balance is $250,000 and the home is valued at $200,000, the borrower will not owe the difference. This protects homeowners. On the other hand, if the mortgage balance is $250,000 and the home is valued at $300,000, the remaining $50,000 belongs to the borrower or the borrower’s estate.

The vast majority of reverse mortgages are HECM loans, which is a program offered by the Federal Housing Administration. These are federally-backed loans, which means that the federal government guarantees the loan.

There are two other types of reverse mortgages:

  • Single-purpose reverse mortgages (Offered by governments and nonprofits)
  • Proprietary reverse mortgages (Private loans backed by an issuing company)

Requirements for a Reverse Mortgage

Most reverse mortgages are HECM (home equity conversion mortgage) loans, so these requirements focus on HECM loans. To qualify for a HECM loan, you must be able to meet the following requirements:

  • Be at least 62 years or older
  • Own your home or have a small amount to pay remaining on your mortgage balance
  • Be up-to-date and stay up-to-date on taxes and homeowner’s insurance
  • Your home is in good condition
  • Complete a free consumer information session provided by the Department of Housing and Urban Development with an approved HECM counselor

Borrowers also need to go through a financial evaluation. The evalutation ensures that borrowers can pay for:

  • Property taxes
  • Homeowner’s insurance
  • Basic home maintenance
  • Home owner’s association fees (if required)

How much money can I borrow?

The amount of money that is available to borrow in a reverse mortgage depends upon a few factors.

  • Age. As you become older, you are able to borrow more money. For example, a 85 year old can borrow more than a 62 year old.
  • Value of home. If your home is more valuable, you can borrow more. For example, if you own a house with a market value of $300,000, then you will be able to borrow more than someone who owns a house worth $100,000. You can also borrow more if your home value has appreciated. For example, if you fully own a house you paid $300,000 for and the market value increases to $350,000, then you can borrow more.
  • Interest rates. At lower interest rates, you are able to borrow more. If the interest rate is 2%, you can borrow less than if the interest rate is 6%.

How You Can Receive Your Money

Reverse mortgages are extremely flexible in the way that the money can be received. Generally, there are four basic options to choose from:

  1. Receive a lump sum of cash at closing
  2. Receive a check each month for as long as you live in the house. This is called a “tenure annuity”.
  3. Receive a check each month for a set period of time. You can decide how long this is. This is called a “term annuity”.
  4. Receive a line of credit that can be used at your discretion. The amount of money available in the line of credit will grow over time.

A borrower for a reverse mortgage does not necessarily need to choose one of these options. You could choose any combination of options to best suit your financial needs. For example, you could take some cash up front and also keep a line of credit open.

What is a reverse mortgage?
A reverse mortgage can help improve your quality of life by giving you more flexibility in your spending. 

Getting Started with a Reverse Mortgage

It is easy to get started with a reverse mortgage. Click here to get an information kit for free and with zero obligation.

ReverseMortgageRatings.com does not offer reverse mortgages. ReverseMortgageRatings.com is not a lender or mortgage broker. ReverseMortgageRatings.com is a website that provides information about reverse mortgages and loans and does not offer any loans or reverse mortgages directly or indirectly through any representatives or agents. We do not direct market toward customers. Please contact us if you have any questions. ReverseMortgageRatings.com is not provided by, nor was it approved by the Department of Housing and Urban Development (HUD) or by the Federal Housing Administration (FHA).