1. Do I have to pay anything monthly? No.
2. When does the mortgage get paid back?
A reverse mortgage is payable when the property is no longer the “home” for any of the borrowers -- usually because of death, moving, or selling the property -- including if you move to a nursing home
3. Does the company "take the house"? NO -- if the debt is less than the sales proceeds of the house
4. Can the company sue my heirs if the house is worth less? NO -- the company only gets repaid out of the value of the house.
5. Am I Eligible?
- No Income Requirements.
- Borrower(s) must be 62 or older. For CHFA: 70 or older/income limits
6. Is it Worth it? High Closing Costs -- starts with 2% origination fee on first $200,000 borrowed; 2% mortgage insurance premium, etc. -- 4,000- $15,000 (except CHFA.)
7. What About Interest? 5.56% fixed (10/09) or about 3% (variable, likely up to 6%) accrues as follows:
- On financed Closing Costs -- from date of closing
- On amounts you take -- from date you take them
8. How much can I get?
- Depends on age, location, and value of your house
- Depends on other debt:
- Federal loans: can't borrow against more than $625,500* in equity
- Jumbo loans: More is available. *2009 - less in 2010
EXAMPLE: 75-year-old widower in
9. How can I take the money? Any one or more of:
- Lump sum
- Line of credit (with/without annual increase!)
- Annuity (only option for CHFA except for modest lump sum)
10. What about Title XIX?
- Lump sums borrowed count as assets; but amounts you take out are not "income" and you cannot be forced to borrow.
and Bad of Reverse Mortgages*
Lisa Nachmias Davis * (updated
Davis O'Sullivan & Priest LLC
1. Do You Need To? Alternatives:
- Connecticut Home Care Program for Elders (no interest on state lien)
- Home Equity Loan for $100,000 (interest-only payments) (if you can)
2. When Not to Do a Reverse Mortgage:
- When the money really won't be enough for your needs
- When you don't plan to stay
- When one spouse would move if the other passed away
- When someone else lives there and is under 62
For example: disabled child -- or younger spouse or relative not included as a borrower
- When you have significant other debt -- including state liens
3. Special Times to Consider a Reverse Mortgage:
- When you want to stay home no matter what
- When home repairs or high property taxes may cause you
to lose your home AND you can really "catch up" by borrowing
- When it's doubtful state aid will suffice for your needs
- To get the mortgage locked in BEFORE applying for state aid
4. If You Do a Reverse Mortgage:
Check your will: did you leave
the house to someone specially?
- Remember: making a GIFT of proceeds will likely affect
future Medicaid eligibility; taking out a lump sum causes problems
- Use an experienced reverse mortgage professional
who asks you about all the questions in this handout
5. Where To Find Out More:
- AARP website - www.aarp.org/revmort
- CHFA (for CHFA mortgages) 860-571-3502