Reverse Mortgage FAQs
- What is a reverse mortgage?
- Can I use the proceeds from my reverse mortgage for anything I like?
- Who are reverse mortgages designed for?
- Does the money from a reverse mortgage affect Social Security, Medicare or pension benefits?
- Will I ever owe more than my home is worth?
- What are the upfront costs associated with a reverse mortgage?
- If there are no payments, what responsibilities come with a reverse mortgage?
- Will the lender take my house?
- Can a reverse mortgage be taken out if there is already a mortgage on my home?
- Do my spouse and I both have to be 62?
- What type of homes won’t qualify for a reverse mortgage?
- Are there tax liabilities that come with my reverse mortgage proceeds?
- What about a home in a “living trust”?
- Can I deduct the interest charged on my loan for tax purposes?
- What is due when the loan is repaid?
- When does the loan become due and payable?
- Do I or my heirs have to sell the property to repay the loan?
- What does HECM Stand for?
What is a reverse mortgage?
A reverse mortgage is a government-insured program designed for homeowners 62 and older that have equity in their homes and want to eliminate their mortgage payments and/or receive supplementary income. Proceeds from a reverse mortgage can be accepted in either a lump sum or regular monthly payments.
Can I use the proceeds from my reverse mortgage for anything I like?
Yes! You can use the money you receive from a reverse mortgage any way you like. Our customers regularly use their proceeds for medical bills, credit card debt, home remodels or college tuition for their children. There are no limits to what you can do, it’s your money!
Who are reverse mortgages designed for?
Reverse mortgages are designed for homeowners at least 62 years of age with moderate to significant equity in their homes who want to eliminate their mortgage payments and/or receive additional cash. You can receive this cash either as a lump sum or a monthly payment, like income. There are a few reverse mortgage options from which to choose, we’ll help you find the right one for you.
Does the money from a reverse mortgage affect Social Security, Medicare or pension benefits?
The proceeds from a reverse mortgage do not affect these benefits although it can affect Medicaid and Supplemental Security Income. We recommend that you consult your financial advisor.
Will I ever owe more than my home is worth?
No, you will never owe more than the home is worth, regardless of the loan balance. Once the last owner(s) passes away or moves out of the home permanently, the heirs can sell the property and pay off the existing mortgage balance or they can refinance the property. If the heirs choose to keep the property, they will have to refinance the entire amount of the existing mortgage balance regardless of home’s appraised value. Heirs can buy the property for less, up to 95% of the current appraised value of the home.
What are the upfront costs associated with a reverse mortgage?
The good news is just about all the costs can be financed as part of your new reverse mortgage, including origination fee, closing costs, and charges incurred by the title and escrow companies. The only out-of-pocket expenses you must pay during the actual process is the counseling fee and our upfront appraisal deposit. Counseling fees are approximately $125 (NOTE: Counseling fees are charged by an independent counselor, not Crestline Funding).
If there are no payments, what responsibilities come with a reverse mortgage?
The first obligation is to enjoy taking advantage of your hard-earned equity. But, just like your original mortgage, you are required to pay your property taxes, keep current on your homeowner’s insurance , and maintain the home. You are also required to notify the lender if you will be away from the property for an extended period of time.
Will the lender take my house?
No, the title remains in your name as long as taxes and insurance are kept current and the property is maintained properly. In rare circumstances the loan servicer or FHA may be required to foreclose if you fail to meet your reverse mortgage obligations.
Can a reverse mortgage be taken out if there is already a mortgage on my home?
Definitely! Any existing mortgages will be paid off at closing. Then you’re free to enjoy the financial freedom that comes along with eliminating your mortgage payment. You are still responsible for maintaining the property, paying property taxes and insurance.
Do my spouse and I both have to be 62?
Yes. Both you and your spouse need to be at least 62 to qualify.
What type of homes won’t qualify for a reverse mortgage?
Vacation homes or other secondary residences and rental properties of more than four units do not qualify. But if you’re looking to get cash out of a property you don’t use as your primary residence, Crestline Funding has mortgage options available for that, too.
Are there tax liabilities that come with my reverse mortgage proceeds?
Currently, there are no tax disadvantages to getting a reverse mortgage. The IRS treats monies received from a reverse mortgage to be loan advances and not taxable income. We recommend a tax advisor for specific questions.
What about a home in a “living trust”?
A homeowner who has put the home in a living trust can usually take out a reverse mortgage, subject to review of the trust documents.
Can I deduct the interest charged on my loan for tax purposes?
Unfortunately, interest is not deductible until you pay the reverse mortgage. You should consult a tax advisor for detailed tax advice.
What is due when the loan is repaid?
The borrower will pay back the cash advances they have received plus accumulated interest and any upfront costs that were financed initially will also be added to the loan balance.
When does the loan become due and payable?
Nothing is due on the loan until the last remaining borrower sells the property, permanently leaves the home, or passes away. Until then, you can live in the home without making any payments to the lender.
Do I or my heirs have to sell the property to repay the loan?
No, repayment can be accomplished by refinancing the existing reverse mortgage to a conventional mortgage loan. The choice is yours/theirs to make! If your heirs sell the property and the proceeds exceed the amount of the home, they can keep the difference. For cases where the proceeds are not sufficient to pay off the loan, then the bank absorbs the difference. If your heirs choose to keep the property, they will have to refinance the entire amount of the existing mortgage balance regardless of home’s appraised value. In cases where a refinance is necessary, Crestline Funding is here to help make that happen.
What does HECM Stand for?
Home Equity Conversion Mortgage