Reverse Mortgage

From 1st Colorado Mortgage Solutions

What is a Reverse Mortgage?

A reverse mortgage, also known as Home Equity Conversion Loans (HECM) are loans designed to assist those that are 62 years of age, or older. A reverse mortgage helps these individuals tap into the equity they’ve built within their homes, and lets you convert a portion of the equity into cash. The borrower can get a reverse loan without having to sell your home, give up title, or obligate yourself to monthly payments. Keep in mind, this is not free money, because you are still charged interest throughout the years.

Reverse Mortgage Benefits

  • The money received can be used to pay off the existing mortgage

  • There are not limited income and credit score requirements for a reverse mortgage

  • There are no monthly payments

  • A non-borrowing spouses not listed on the mortgage can remain in the home if the borrower passes away

  • Funds can improve monthly cash flow or become a financial planning tool

  • You will never owe more than your home’s value at the time the loan is paid

  • No restrictions to how you use the money you receive

How a Reverse Mortgage Works

  • You will remain the owner of the home
  • You must undergo approved educational counseling
  • The borrower can make monthly payments, but monthly payments are not required
  • You can receive the money in many ways and the funds can be used however is wanted by the borrower
  • You will not owe more than the value of your home incase of decline in value. If your home sells for less than what is owed, FHA insurance pays the difference.

Frequently Asked Questions

  1. What are the minimum qualifications for a Reverse Mortgage?
    • The borrower(s) must be at least 62 years of age
    • You must own your home
    • The borrower must occupy the home as their primary residence
    • The borrower must be able to meet the financial obligations of the loan
  2. How does the borrower receive the money from the loan?
    • A borrower can receive their funds as one of the following: a.) a line of credit, b.) monthly installments, c.) a full or partial lump sum, or d.) a combination of the three.
  3. How much money can I receive?
    • To determine how much money you may be able to receive comes from a variety of different factors, such as but not limited to:
      • The age of the youngest borrower;
      • The appraised value of the home
      • Current interest rate
      • Initial Mortgage Insurance Premium
  4. How can the money from a Reverse Mortgage be used?
    • The money now belongs to the homeowner, so it is entirely up to them, some options are:
      • Retirement fund
      • Unexpected expenses
      • Home repairs
      • Vacation
      • Health care emergencies
      • Pay off debt
  1. When does the loan need to be repaid?
    • As long as taxes, homeowner’s insurance, and homeowners association dues (if any) are paid and the home is maintained in good order, repayment of the loan balance is not required as long as the last borrower continues to occupy the home as their primary residence.
  2. What fees go into obtaining a Reverse Mortgage?
    • Mortgage Insurance Premium (MIP). MIP can be financed into the loan, but you’ll pay an initial 2% at closing as well an annual MIP equal to o.5% of the outstanding loan balance.
    • Origination Fee.
    • Servicing Fee. Lenders can charge a monthly fee to maintain and monitor your loan, for the life of the loan.
    • Third-party charges. Third parties charge their own fees for closing costs, such as the appraisal, title search and insurance, inspections, recording fees, and mortgage taxes.
  3. What types of homes are eligible for a Reverse Mortgage?
    • Your home must be a single-family home or a 2-4-unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

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  • Help you reach your homebuyer dreams

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