Reverse mortgages are available to homeowners who are at least 62 years old and own their homes. Any outstanding balances must be paid off from equity in the house, and the house must be your principal residence. As part of the qualification process, applicants are assessed financially to determine their financial capacity and willingness to pay obligations.
How much a lender will loan you depends on how old you are at the time of closing, how much your house is worth, how many liens you have, and what the interest rate is. The amount of money that you receive will depend on the amount of money you pay off your existing mortgage and other mandatory obligations as well as the payment method you select. Borrowers are limited by HUD to using 60% of the available funds (after closing costs & fees) in the first year. The remaining funds become available in year two. According to HUD, the maximum disbursement limit is equal to the GREATER of:
You can choose from a variety of options. The money can be withdrawn in a lump sum (up to HUD’s maximum withdrawal amount for the first year)*, set up as a line of credit, a monthly payment, or a combination of all three. The Line of Credit or monthly Tenure Payments or monthly payments cannot exceed 60% of the Principal Limit in the first year. As soon as possible, the Line of Credit or Tenure/Monthly Payment will increase after the first year.
With a fixed interest rate reverse mortgage, you can only make a single payment in a lump sum.
A reverse mortgage’s fees and cost depend on a variety of factors. On HECMs, for example, the broker/lender receives an origination fee, FHA receives a mortgage insurance premium, and title, settlement, and escrow fees are paid. There are no hidden costs in the Good Faith Estimate (GFE). Service fees may be charged monthly.
At closing and throughout the term of the loan, an FHA Mortgage Insurance Premium (MIP) must be collected. Mortgage insurance premiums are added to the borrower’s loan balance. MIP (Mortgage Insurance Premium) is calculated based on the appraised valuation of your home or a maximum amount of $970,800 (the 2022 national lending limit cap) and is charged at closing. Each month’s FHA insurance premium is determined by the outstanding loan balance.
Yes. To protect borrowers from receiving incorrect information about reverse mortgages, borrowers must receive counseling from an independent third party HUD-approved counselor. Before closing the loan, the lender must receive the counseling certificate. Contact your local HUD office or Mortgage Loan Originator to locate a reverse mortgage counselor near you.
Reverse mortgage proceeds are typically not subject to individual income taxation, but you should consult with your tax advisor.
Reverse mortgages were created so borrowers can avoid paying most fees while they have the loan. A reverse mortgage appraisal is usually free, but some agencies waive the counseling fee. In spite of that, reverse mortgages may be accompanied by a monthly servicing fee (which is financed and added to the balance of the loan). For more information on the service set-aside, please talk to your Mortgage Loan Originator.
AARP free information on reverse mortgages
Phone: 1-800-209-8085
The Consumer Financial Protection Bureau (CFPB) Consumer Lookup
http://www.nmlsconsumeraccess.org/
Housing Counseling Clearinghouse
Phone: 1-800-569-4287
The Eldercare Locator: Local Resources for Older Adults
http://www.eldercare.gov
Phone: 1-800-677-1116
Federal Trade Commission (FTC) to report possible fraud
http://www.ftc.gov
Phone: 1-877-FTC-HELP (1-877-382-4357)
National Council For Aging Care
http://www.aging.com/
Phone: 1-877-664-6140
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax or financial advice. Consult with a qualified attorney, accountant or financial advisor for additional legal or tax advice.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Kevan Green
C2 Reverse Mortgage Professional
NMLS #256908 | BRE #01140535
This licensee is performing acts for which a real estate license is required. C2 Financial Corporation is licensed by the California Bureau of Real Estate, Broker BRE #01140535 | NMLS #256908 Loan approval is not guaranteed and is subject to lender review of information. Loan is only approved when lender has issued approval in writing. Specified rates may not be available for all borrowers. Rate subject to change with market conditions. C2 Financial Corporation is an Equal Opportunity Mortgage Broker/Lender. The services referred to herein are not available to persons located outside the state of California.
C2 Financial Corporation is approved to originate VA loans, and has the ability to broker such loans to VA approved lenders. C2 Financial Corporation is not acting on behalf of or at the direction of HUD/FHA or the VA.
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