Ten
Reverse Mortgage Basics
(updated 6-1-24)
Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
59 Elm Street, Suite 540
New Haven, CT 06510
203-776-4400
Fax: 203-774-1060
1. Do I
have to pay anything monthly? No.
But you do have to pay property taxes and homeowner's insurance!
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. Payment can now be deferred if
a spouse, who is not a borrower, is living in the 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;
- Good history of paying property
taxes and homeowner's insurance;
(or good
explanation)
- Borrower(s) must be 62 or older. For CHFA: 70+ and income under
$83,000.
6.
Is it Worth it? High Closing Costs -- 2%
origination fee, 2% mortgage insurance premium, etc. "Saver" mortgage
has cheaper costs but you access less equity. CHFA mortgages are cheaper.
7.
What About Interest? starts at around 3%, accrues as follows:
- On financed Closing Costs -- from date of closing
- On amounts you take -- from date you take them
- On monthly service charges and
mortgage insurance premiums
if not paid by you currently
8.
How much can I get?
-
Depends on age, location, and value of your house
- Depends on other debt:
EXAMPLE: 75-year-old widower
in
9.
How can I take the money? Any one or more of:
- Lump sum (subject to limits, usually 60% of total qualified)
- Line of credit (increases annually; usually can only take 60% first
year)
- Annuity (only option for CHFA except for $5,000 lump sum)
10.
What about Title 19?
- Lump sums kept segregated do NOT count as assets; amounts you take out are not
"income"; you cannot be forced to borrow. TIP:
the separate account stays exempt even if you go into a nursing home
later on and maybe could pass to an heir by beneficiary designation that avoids
probate.
The Good and Bad of Reverse
Mortgages
(updated
Lisa
Nachmias
Davis
Davis O'Sullivan & Priest LLC
59 Elm Street, Suite 540
New Haven, CT 06510
203-776-4400
Fax: 203-774-1060
davis@sharinglaw.net
1.
Do You Need To? Alternatives:
- Connecticut Home Care Program for Elders (no interest on the state's
lien)
- Home Equity Loan (interest-only payments first 10 years)
(if you can qualify)
-
Home can be lonely if you can't get out and drive any more -- move?
2.
When Not to Do a Reverse Mortgage:
- When the money really won't be enough for your needs and you'll have to
move anyway
- When you don't plan to stay
- When one spouse would move if the other passed away
- When someone else (especially not a spouse) 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
-
When your home won't meet FHA requirements easily
-
Condo must be FHA-approved -- when this can't happen
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 Medicaid will suffice for your needs
- To get the mortgage locked in BEFORE applying for state aid
-
To give your heirs some liquidity to pay expenses pending sale or after
death
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 has to be done correctly
- Use an experienced reverse mortgage professional
who asks you
about all the questions in this handout
5.
Where To Find Out More:
- www.reverse.org
- Consumers
- CHFA (for CHFA mortgages) 860-571-350