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Reverse Mortgages FAQ

Take a look at our reverse mortgage FAQ section for any questions you have about reverse mortgage services in southern California. We offer detailed information about the pros and cons, application procedure, and eligibility conditions for reverse mortgage.

  • What is a reverse mortgage?

    A reverse mortgage is a loan that enables senior homeowners, ages 62 and older to convert part of their home equity into tax-free* income—without having to sell their home, give up title to it, or make required monthly mortgage payments. Borrowers can use the funds almost any way they choose.
    * Tax-free proceeds from a reverse mortgage loan. The loan is subject to foreclosure for failure to pay taxes and insurance, to maintain the property and to comply with loan terms. Consumers remain responsible for property taxes, homeowner’s insurance and home maintenance. Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
  • What are the advantages of a reverse mortgage loan?

    There are many. Here are a few of the most significant:
    • Remain independent. A reverse mortgage allows you to remain in your home and retain home ownership.
    • No monthly mortgage payments required. Repayment of the loan is not required until the last borrower on title moves, sells the property or becomes deceased*.
    • Tax-free proceeds from loan. Currently the Internal Revenue Service treats monies received from a reverse mortgage as loan advances and not taxable income; however, you should consult your professional tax advisor for any affect on taxes or other possible benefits.
    • Freedom and flexibility. The money you get from a reverse mortgage loan is yours to use in any way you choose.

    It is important to note that the borrower must adhere to loan responsibilities as agreed upon at closing: reside in the home as primary residence, pay for property charges such as taxes, hazard insurance and homeowner association dues, maintain the property in reasonable condition and make required repairs. Failure to meet these responsibilities may result in the loan becoming due and payable.

  • Who is eligible for a reverse mortgage loan?

    To be eligible for a reverse mortgage, all borrowers must be titleholders of the property and age 62 or older.
  • What if I am older than 62, but my spouse is younger?

    Only one spouse needs to meet the HECM age requirement, not both. If you and your spouse are interested in a HECM loan, discuss the eligibility requirements with one of our consultants.
  • What are the initial costs for a reverse mortgage loan?

    Any initial costs will be assessed during your consultation and your counseling session. Generally, there is a $200 fee depending on the government sponsored service provider. However, any initial costs may be dependent on your specific situation.
  • I’ve heard that with a reverse mortgage the lender would own my home. Is this true?

    It’s absolutely false. The borrower retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower. Because the homeowners retain title, they remain responsible for the payment of property taxes, hazard insurance, and maintaining the home in reasonable condition – just as they would with a standard first mortgage or home equity loan. The loan is subject to foreclosure for failure to pay taxes and insurance, to maintain the property and to comply with loan terms.
  • Why do I need to go through counseling for a HECM loan?

    HUD set this requirement so that seniors are fully aware of the responsibilities of a reverse mortgage. This is a safety precaution set by the HUD, so that seniors understand what a reverse mortgage is and what their requirements as the borrowers are.  Go here to search for a HECM Counseling Agency.
  • What kind of property is eligible for a HECM Loan?

    A single family house and a 2-4 multi-family unit is eligible as long as the senior is still using the house or one of the units as their principal residence. Also, HUD-approved condos and manufactured homes that meet FHA requirements are eligible. However, large apartment units are not eligible.
  • Can my current income influence my ability to get a reverse mortgage?

    No. Since reverse mortgage borrowers are not required to make monthly mortgage payments, there are no income qualifications.
  • Does my credit score factor my eligibility?

    The equity that you have in your home is an asset that you already have, we are just making the equity that is available to you. Since it is an asset that you do have, a low credit score requirement applies.
  • What if I have an existing mortgage?

    You may be eligible for a reverse mortgage loan even if you still owe money on your mortgage. However, a portion of the proceeds you receive (or proceeds from another source) must be used to pay off any existing mortgage you have on the property at closing.
  • What can prevent qualification?

    • Age: minimum of at least one borrowing spouse is 62
    • Available equity: If the loan on the current property is greater than the available loan amount, this can often prevent qualification
    • Residency: You must live in the home
  • Will I have to make monthly payments?

    No. You’re not required to make any monthly reverse mortgage payments until the loan is due. However, you can make payments any time you choose. There are no penalties for making payments before the loan is due. You will remain responsible for property taxes, homeowner’s insurance and home maintenance.
  • What are my financial responsibilities with a reverse mortgage?

    1. While you do not have to make a payment, you still must pay taxes
    2. While you do not have to make a payment, you still must pay insurance or assessments, including homeowners association charges are paid timely, the home is maintained in good condition
    3. The property must remains at least one borrower’s primary residence, you do not reside elsewhere for 12 consecutive months, or until you decide to sell your home.
  • How much of my home’s equity can I access with a reverse mortgage?

    Loan amounts vary based on the reverse mortgage chosen, the age of the borrower(s), the appraised value of the home or the FHA national lending limit and current interest rates (national lending limit applies to the Home Equity Conversion Mortgage (HECM) product). Generally, the higher the home value, the lower the interest rates and the older you are, the more you can borrow. Please note that you may use a large portion of your home equity, thereby reducing the equity available to you or your heirs when you sell the home or when the loan becomes due. See Calculator for more information.
  • How is a reverse mortgage loan like a home equity loan? How is it different?

    Both a reverse mortgage and a home equity loan use the equity you have built up in the home to provide you with readily available cash. They differ in that with a home equity loan you must make regular monthly payments of principal and interest. However, with a reverse mortgage you are not required to make monthly mortgage payments. Repayment of the loan is also not required until the last borrower on title moves, sells the property or becomes deceased. It is important to note that the borrower must adhere to loan responsibilities as agreed upon at closing: reside in the home as primary residence, pay for property charges such as taxes, hazard insurance and homeowner association dues, maintain the property in reasonable condition and make required repairs. Failure to meet these responsibilities may result in the loan becoming due and payable.
  • How can I use the proceeds I receive?

    You can use the proceeds for almost anything you choose. You can pay for health care (including in-home care), make home repairs or cover unexpected expenses.
  • Can I use the proceeds from a reverse mortgage loan to purchase a home?

    Yes. You will need to make a down payment using an acceptable source of funds, and apply the proceeds from your reverse mortgage at the time of purchase. This down payment is determined by the home value minus the amount of proceeds received from the reverse mortgage (after subtracting loan costs). You will not need to make any reverse mortgage payments while you live in your new primary residence or until a maturity event occurs.
  • Can I use a HECM for purchase to build a new home?

    If you want to start a new construction project to build a custom house, you cannot use a HECM for purchase to finance it. You can only use a HECM for purchase to buy a home that has already been built. A HECM for purchase was created for seniors that want to live closer to their family members or wish to move into a smaller, more suitable residence.
  • Are the proceeds I receive taxable?

    Loan advances from a reverse mortgage loan are generally not considered taxable income. This means the proceeds you receive from a reverse mortgage loan may be tax-free (not intended to be tax advice, please consult a tax advisor, payment of property taxes is still required).
  • When will I have to pay the principal and interests cost of this loan?

    The loan is due and payable when the last borrower on title sells the property, permanently leaves the home, or passes away. Until one of these events takes place, the borrower(s) live in their home and no monthly mortgage payments are required. It is important to note that borrower(s) must adhere to loan responsibilities as agreed upon at closing: reside in the home as primary residence, pay for property charges such as taxes, hazard insurance and homeowner association dues, maintain the property in reasonable condition and make required repairs. Failure to meet these responsibilities may result in the loan becoming due and payable.
  • Can I refinance a reverse mortgage, as I would be able to do with a traditional home mortgage?

    Yes. Refinancing can make sense if your home either increases in value, the interest rates drops or the maximum lending limit increases. Keep in mind that when deciding to refinance a reverse mortgage, it is important to compare the amount of benefit versus the cost of the loan before making this decision. The amount of benefit received should be twice the amount of the cost to refinance the loan.
  • When the loan is due, will I ever owe more than my home is worth?

    As stated earlier, a reverse mortgage is a non-recourse loan in which a lender may only look to the value of the home for repayment when the last borrower on the loan permanently leaves the home (loan maturity); no other assets may be attached if the loan balance grows beyond the mortgaged home value.
    If you or your heirs wish to retain the property, then the full amount of the loan must be paid regardless of property value. However, in cases where the property value is less than the amount owed, you or your heirs may choose to release the property to the servicer and therefore you would not be responsible for any difference between the amount owed and the value of the property.
  • If I decide to pay back the loan early, would I incur any penalties?

    No. You can pay back the loan at any time and won’t be charged any fees for doing so, as long as payment is at least six months after funding date.

    Use of proceeds for investment or other financial products may result in the loss of principal associated with that investment or product and/or the reduction or loss of Supplemental Security Income (SSI), Medicaid or other government benefits. Ask for details during HUD-approved counseling, and contact government benefit administrative offices for more information.

  • If I take a reverse mortgage loan, will I still have an estate that I can leave to my heirs?

    The amount of equity remaining in your home will depend on many factors such as the initial amount disbursed when the reverse mortgage was first originated, additional amounts received either through monthly payments or line of credit, interest rates and fees over the life of the loan, length of time in the reverse mortgage is open and the value of your home at the time of sale. It’s important to remember that by using your home equity early on during the life of the loan, you are potentially reducing or eliminating the ability for your home to provide for you or your heirs in the future. The more you borrow early on, the greater the interest and charges are over the life of the loan.
  • Would a home that is in a ‘living trust’ be eligible for a reverse mortgage loan?

    Yes. In most cases, a homeowner who has put his or her home in a revocable living trust can usually take out a reverse mortgage, subject to review and approval of the trust documents.
  • What is a non-recourse loan?

    A non-recourse loan is a home loan in which a lender may look only to the value of the home for repayment of the loan; no other assets may be attached if the loan balance grows beyond the subject property home value.