A reverse mortgage is designed to provide homeowners who are 62 years of age or older to borrow money against the equity that they have built up in their homes.  These individuals do not need to give up the titles to their properties, sell them or even take on a new or increased monthly payment for their mortage.  A reverse mortgage is simply a mortgage in which the lender reverses the payment stream.  Instead of homeowners making their monthly paymets for their homes, as is standard with a conventional loan, the lender will begin making regular payments to the homeowner.  Following are several questions that consumers ask about the reverse mortgage process.
 

How Much Money Will I Be Able To Receive?

How much you will be qualified to receive will depend upon how old you are or how old the youngest marital partner is, the home's appraised value, current intererst rates and in the event of a government program, your area's limits on lending.  Typically, the more valuable that your house is and the older that you happen to be, the more cash you will be able to receive.  This is especially true when you owe a very small amount on the property.

How Can I Know If My Home Qualifies?
 

Properties that are eligible for a reverse mortage include homes for single familes, pre-fabricated homes that have been manufactured after 1976, properties with two to four units, townhouses and condominiums.  Coopertive housing will generally not qualify for a reverse mortgage.  Some lending institutions, however, have created private programs that will offer  a reverse mortgage to New York co-ops.
What Are The Different Options In Payment Plans?
 

Homeowners can opt to receive their reverse mortgage money as part of a lump sum or in increments through fixed monthly payments that have a specified term for the duration of your residence of the home, as a credit line, or in a combination of two or more of these methods.  Most homeowners, in fact, as many as 60%, opt to have their reverse mortgage money in the form of a credit line.  This enables these individuals to draw upon the proceeds of the loan as they choose.  To discover more about this process, click here.
 

It Seems Like The Unused Portion Of The Credit Line Option Has A Feature For Growth.  Will I Be Able To Earn Interest On This?
 

No.  Homeowners are unable to accrue interest on an unused amount of the credit line that has been extended.  The growth factor, which happens to be about the equivalent of the interest rates that the lender charges you, considers the fact that your property has appreciated over the past year and also that you have aged an additional year as well.

What Can I Do With Reverse Mortgage Proceeds?

You can use the proceeds from your reverse mortgage for almost anything at all.  This could mean supplementing the money that you receive for retirement to help pay for your costs of living, making repairs or changes to your property such as installing a ramp or widening walkways, covering medical expenses, purchasing a new vehicle, taking a phenomenal vaction, paying taxes on your property and even avoiding foreclosure.
 

Who Do Reverse Mortgage Interest Rates Work?
 

Homeowner are only charged interest on the actual money that they receive on a reverse mortgage.  While fixed rate reverse mortages are slowly entering the market, most of these mortage options have interest rates that are variable and which are tied to an index  and plus a margin will additionally place several more points onto your rate.  This is not paid from your loan monies, but will instead, increase until it is time for repayment.

What Does It Take To Qualify For A Reverse Mortgage?

As long as you are a minimum of 62 years old and own a property that has a sufficient amount of equity, you should be able to qualify for a reverse mortgage.  There are no specific medical or income requirements for qualifying for these loans.
 

What If I Currently Have A Mortgage?
 

Even if you owe money for a current mortage you may still be able to receive a reverse mortgage.  In this instance, however, the reverse mortage will need to be in a first lien position so that current debt is paid off.  The existing mortage can be paid off by borrowing money from a friend or family member or by using a reverse mortgage or money that you have saved.
 

For instance, let's say that an individual owes $100,000 on his or her current mortgage. Based on the current income, age and property value of this reverse mortgage applicant, he or she is qualifed for a reverse mortgage of up to $125,000.  When this is the case, the applicant should be able to resolve all unpaid mortgage debt and retain $25,000 to do with as he or she pleases.
 

If you are to determined to only qualify for a loan for $85,000, it would be necessary for you to acquire the remaining $15,000 on your own.  Thus, all that you have obtained through your reverse mortage will be put towards your existing mortgage.  The benefit is that you will not have to make a montly payment on your current mortgage any longer.
 

If a reverse mortgage applicant does not have the funds to pay off a current mortgage, he or she may use money from a friend or family member, gift or grant to resolve this difference but he or she will be unable to secure a new loan.
 

What Are Monthly Servicing Fees And How Common Are They?
 

The monthly servicing fee that you may be responsible for paying will depend upon which FHA HECM product that you choose and will normally range between $30 to $35 each month.  This will cover the costs of continued servicing for your reverse mortgage.  The SFSA or Servicing Fee Set Aside is an estimation of the entire servicing fees for the duration of the reverse mortgage loan.  This is determined according to the life expectency of the aplicant and the price of the servicing fee on a monthly basis.  This is not a closing cost and does not reflect any part of your beginning loan balance.  It is instead set apart from the money that you are able to access and then deducted from your monthly balance at an equivalent rate to the servicing fee per month.
 

Several HECM products do not require a servicing fee set aside or a servicing fee for each month.  You should consult with your mortgage counselor or lender to garner information concerning this portion of the HECM product.
 

Will A Reverse Mortgage Cause Me To Lose My Medicaid Or Other Assistance?
 

The Medicare and Social Security benefits of those who qualify for a reverse mortgage are not affected.  If you are a Medicaid recipient, however, you must use all proceeds from your reverse mortgage immediately.  Any money that you choose to retain will be counted as an asset that may effect your eligibility for Medicaid.  For instance, if your reverse mortgage provides you with a lump sum of $4,000 for the purpose of performing repairs to your home and you use all of this money in the same month in which it is received, your eligibility should not be impacted.  The funds that remain in your bank account after the calendar month has passed, however, will be counted as part of your assets.  If this pushes the worth of your total assets beyond $2,000 when you qualify individually or $3,000 for couples, the eligibility for Medicaid could be lost.  For safety purpose you should contact Medicaid expert.
Should I Attend Counseling?
 

One of the most vital consumer protections that is included in a reverse mortgage program is counseling.  This allows you to discuss your options with an unbiased third-party who can help you to learn your other options before locking into a reverse mortgage.
 

A Hud-Approved and local counseling agency can provide you with the counseling that you need as can any counseling agency that is nationally sponsored.  This is a requirement for all applicants for reverse mortgages and can be completed in-person or over the phone.
 

Legally, a counselor is required to review (i) alternative options to the reverse mortgage (ii) additional conversion options for home equity which are available or which may become available (iii) the short and long-term implications of taking on a reverse mortgage loan and (iv) the tax consequences of a reverse mortgage and how they may impact the eligibility of the borrower under federal and state programs and the effect that this will have on the borrower's estate and his or her heirs.
 

How Will My Loan Be Repaid?
 

While a reverse mortgage remains outstanding, no montly payments must be made.  Once you have ceased to live within the dwelling as your principal residence as the result of having passed away, moved out or sold the home, the loan will then be repaid.  The total amount that an individual owes for a reverse mortgage will not be more than the actual value of the house.  Additionally, when the home has been sold and the proceeds from the sale are in excess of the reverse loan amount, the money will be given to you or the members of your estate.
 

When Should I Not Consider A Reverse Mortgage To Be A Viable Option?
 

Given the upfront costs that a reverse mortgage typically entails or if you plan to move within the next few years, you should consider options that may be less costly to secure such as no-interest loans, home equity loans and grants that can be received through the county or other local organizations to perform home repairs, or programs for tax deferrals.  Additionally, if you wish to leave your property to your heirs, then you should continue to research additional funding options, because it is typically the case that the home will be sold to repay the reverse mortage loan amount.