By Andrew Gabb Sept 15th 2018
There are many misconceptions about what is a Reverse Mortgage and How they Work?
What happens if I have already have a mortgage?
The reverse mortgage funds must be used to pay off your current mortgage and fees. This eliminates your monthly mortgage payments. If you qualify for $150,000 and your mortgage is $90,000 you will get $60,000.
Will I owe more than the house is worth?
You as the homeowner(s) or your heirs get to keep the remaining equity in your home. The amount you owe depends on how much you borrowed, when your reverse mortgage was funded and the current market value of your home. The lenders claim that over 99% of homeowners have money left over when their reverse mortgage loan is repaid. Even if your loan reaches the value of your home you cannot be forced to leave your home.
Are there any fees to apply for a reverse mortgage?
Similar to a traditional mortgage, there are some fees to arrange a reverse mortgage.
- Appraisal fee – This is a $350 fee you pay to the property appraiser.
- Fee for independent legal advice (this is a $500 to $750 fee you pay to your lawyer we can arrange this for you)
- Administration fee $1795 - $2495 –Is paid to lender from the proceeds of the Reverse Mortgage.
How much are reverse mortgage interest rates?
Interest rates for a reverse mortgage are 1.5% to 2.5% higher than a traditional mortgage because your loan does not require any regular monthly payments. You can choose from 5 loan terms and interest rate. Choose a 6 Month, 1 Year, 3 Years, 5 Years or a Variable Rate. You can make monthly interest payments and make 1 payment each year to reduce the amount borrowed. Most people don’t make any payments.
Will I always own my own home?
You own your home and retain title and ownership as long as you live there as your principal residence, pay property taxes, insurance, and maintain the property in good condition. You can never be forced to leave your home because you have a reverse mortgage.
What happens if I move from my principal residence without selling my home?
Once you have moved out of the house, you have 180 days to repay the loan to your lender. If you move to a nursing home or a care facility, you can get 50% off for the pre-payment amount (if this happens in less than 3 years after you took the mortgage out).
What happens if I sell my home or end my reverse mortgage?
Just like a traditional mortgage, you are required to settle the loan by the closing date. If only one of the homeowners has passed away, the spouse or the other person on title can continue to live in the home without having to settle the loan. If you sell your home then buy another home you can transfer your mortgage-its portable.
What happens after both homeowners have passed away?
Your executor must notify your lender then provide a copy of the death certificate and will. The estate has 180 days after the notice of death to settle the loan.
How do I qualify for a reverse mortgage - the 4 main factors?
- Ages of both applicants must be over 55, older folks qualify for larger loans
- Location (postal code) city detached homes qualify for more than country or a condo
- Property value and equity
- Property type
How do I apply for a reverse mortgage?
- Reverse Mortgages are not always the right way to manage debt
- Decide if a reverse mortgage is for YOU by comparing your options
- Obtain an assessment of the likely $ amount that you would qualify for?
- Complete Application
- Pay for an Appraisal
- Receive your money or first monthly payment