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Understanding Reverse Mortgages

Simply put, reverse mortgages give you a way to receive money from your home without having to sell your home or make monthly payments. The reverse loan is made against your home, yet you don’t have to pay it back as long as you’re living in the home. The money to which you are entitled can be paid all at once, as monthly cash advances, or at times and amounts that you choose. The home must be considered the “primary” and/or “principal” place of residence. Single-family, one-unit dwellings are eligible, as well as some 2-4 units and owner-occupied dwellings. Condominiums, planned unit developments, and manufactured homes are also eligible, depending upon the circumstances. Co-ops and mobile homes are usually not eligible.

John E. Neumeier, CSA and Executive Vice President of the Generation Mortgage Company, wants seniors and their families to understand that “The reverse mortgage company never takes the home and you can never owe more than the home is worth and, even better news, you do not need to qualify financially. The proceeds from a reverse mortgage can be used for anything such as supplementing your monthly living expenses, home healthcare expenses and prescriptions, home remodeling or simply retaining the proceeds as a line of credit for peace of mind.”

What are the Costs ?

Origination Fee: The origination fee covers a lender’s operating expenses, including office overhead, marketing costs, etc., for making the reverse mortgage.

Mortgage Insurance Premium: Under the HECM program, borrowers are charged a mortgage insurance premium (MIP). The MIP guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds. Furthermore, the MIP guarantees that you will never owe more than the value of your home when the HECM must be repaid.

Appraisal Fee: An appraiser is responsible for assigning a current market value to your home. In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made.

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