Common Questions
What happens to our home when we pass away?
Your home will go to your heirs just like it will now. The outstanding loan balance (cash you’ve used plus interest and any servicing charges) must be repaid once your estate is settled. Your heirs may sell the home, pay off the outstanding loan balance and keep the remaining cash, or refinance the outstanding loan balance (or use other assets to repay it) and keep the home. Your heirs are given a reasonable amount of time to resolve estate issues and repay the reverse mortgage.Will we lose our home?
No. When you obtain a reverse mortgage, you continue to own your home. Reverse mortgages are actually a very safe type of home loan, because you are not required to repay it as long as you live there.What happens if we decide to live somewhere else?
Your home needs to remain your principal place of residence when you have a reverse mortgage. You may leave your home for vacations or for other reasons for up to 12 consecutive months. If you decide to sell your home, you simply repay the outstanding loan balance from the sale proceeds and keep the remaining cash.
What happens if my spouse or I need to go to a nursing home?
The reverse mortgage need not be repaid as long as one homeowner remains in the home. If the last homeowner needs to go to a nursing home but intends to return, the reverse mortgage doesn’t need to be repaid until that homeowner has been gone for 12 consecutive months (but the homeowner would likely need to sell the home at that point anyway, and use the remaining equity to pay for the nursing home).What happens if the outstanding loan balance exceeds the value of my home?
Nothing happens while you are living there. Your line of credit and/or monthly payments continue as long as one homeowner remains there. Once your home is sold, if the net sales price is not enough to repay the outstanding loan balance, you or your heirs are not required to make up the difference.How long do our heirs have to repay the outstanding loan balance?
An amount of time that is reasonable to settle the estate. Generally, the lender will commence legal action if the loan is not repaid within 1 year of the last homeowner passing away.How long does it take to obtain a reverse mortgage?
When dealing with an experienced lender, it should take about the same amount of time as a typical refinance. Issues like extensive required home repairs may slow the process however.Are reverse mortgages costly?
The closing costs for reverse mortgages are usually higher than a regular home loan (although the Cash Account program can have little or no closing costs), but their interest rates are usually very good. Their closing costs are absorbed by the loan, so very little cash is needed to obtain a reverse mortgage. Because of their closing costs, they are often not the best choice for homeowners that plan on moving from their home within a couple of years. Over time the interest rate becomes more important than the closing costs, so homeowners that plan on remaining in their home for at least 5 years or so will find that reverse mortgages are a good choice. Some homeowners obtain them for shorter times though because of their tremendous benefits.What is Loan Service Set Aside?
Every month a small Loan Servicing Fee is added to the outstanding loan balance of a reverse mortgage. This amount compensates the Loan Servicer. Loan Service Set Aside represents the amount that these Loan Servicing Fees may add up to when the youngest homeowner reaches life expectancy. Loan Service Set Aside is not a closing cost, rather it is a reduction to the amount of cash available to the homeowners.What if we already have a mortgage?
The reverse mortgage will pay off your existing loan. For example, if you qualify for $200,000 from a reverse mortgage and currently owe $50,000 on your home, after paying of your existing loan $150,000 remains available for your use. You will no longer have monthly payments to make on the $50,000 loan, and the remaining $150,000 is available as a Lump Sum at Loan Closing, Line of Credit, or to establish monthly income by receiving Tenure or Term payments.What if we have a living trust?
Your trust will need to be reviewed to ensure that the reverse mortgage doesn’t violate its terms (most living trusts allow for a reverse mortgage).Is the cash we receive taxable?
No. Reverse mortgages are home loans and not considered income.What if one or both of the homeowners are unable to make financial decisions?
Professional service providers are experts at helping homeowners with these types of issues. Depending on the situation, a power of attorney or other course of action may be needed.Do our income and credit have anything to do with our ability to obtain a reverse mortgage from Castle Financial?
No. The amount of cash you qualify for is based on the age of everyone on title to your home (all must be at least 62, and older homeowners qualify for more cash), the value of your home, the county in which it is located, and interest rates at the time. Your income and credit have no affect on your interest rate or closing costs.What if someone is currently on title to our home that is under
the age of 62?
You can probably remove them from title and qualify for a reverse mortgage. This is commonly done with children that had been placed on title to qualify for a regular home loan or for other reasons. This may also be done with a spouse, but you need to carefully consider that if the spouse that remains on title leaves the home permanently, the reverse mortgage will need to be repaid.What do the experts say about reverse mortgages?
Many financial experts believe that reverse mortgages are an excellent way for seniors to secure their financial future.We still don’t quite understand reverse mortgages. What should we do?
We are experts at helping homeowners understand reverse mortgages – we make it easy every step of the way. Contact us for a personal overview of all of the details and benefits of a Home Equity Conversion Mortgage.