Frequently Asked Questions
What is a Reverse Mortgage?
A reverse mortgage is a unique loan that allows you to convert a portion of the equity in your home to cash with no repayment required as long as you live in the home. You can receive tax-free cash from your home without worrying about a payment like tradition, "forward" mortgages. Instead of making payment, the cost of borrowing the mortgage is simply added to your loan balance. Your age the value of the home and interest rates are used in the formula to determine the amount of money available. You can take the cash you need in a lump sum, as a monthly income or anyway that suits your needs. You can even change your mind about how you receive the cash after the loan closes. As your needs change, your reverse mortgage can change. When you move (out of the home for 12 continuous months), sell or pass away, the loan is due. At that time, you or your heirs pay back the money borrowed plus the cost borrowing it.
This can be done by selling or refinancing the home. The balance of the equity is yours or your heirs. Just like any mortgage, you stay in the title and in control.
Who Qualifies for a Reverse Mortgage?
Homeowners who are at least age 62 can qualify. There are no income or credit requirements. Generally, your home must be a single family residence a 2-4 unit building, or a condominium (some restrictions apply to condos). Manufactured homes may qualify if they were built after 1976, have an FHA approved foundation and are taxed as real estate. In all cases, the property must be your primary residence.
Reasons People Want a Reverse Mortgage
The use of reverse mortgage funds is not restricted - it's your money and you can use it however you choose. The following are some common reasons people obtain reverse mortgages:
- Increase monthly income
- Remodel or make repairs
- Payoff an existing mortgage
- Payoff credit cards
- Property Taxes
- Travel
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- Purchase a car or motor home
- Paying for help around the house
- Health care and prescription drugs
- Long term care insurance
- College tuition for you, your children
- Or your grandchildren
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Types of Reverse Mortgages Available
FHA - HECM (Home Equity Conversion Mortgage) - Available with monthly or annually adjustable interest rate options. This government-backed program is by far the most popular reverse mortgage option.
Fannie Mae Home Keeper - Rarely used in the Puget Sound area, but a valuable option for mid-priced homes in rural counties.
Financial Freedom Cash Account - Western States Mortgage is a correspondent with Financial Freedom and offers their proprietary product for high value homes (approximately $600,000 and higher).
