Reverse Mortgage Q&A

1. Is it better to wait until I’m older to get a reverse mortgage?
The amount of your reverse mortgage is not based solely on age. Your Available Principal Limit (APL) is based on a combination of Principal Limit Factor (PLF), age, equity and interest rates. While you won’t get any younger, equity and interest rates do fluctuate, resulting in the potential for a lower APL because HUD can and does adjust the PLF.

2. Will I lose government assistance (Social Security, Medicare) if I get a reverse mortgage?
A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or Supplemental Security Income (SSI), any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain count as an asset and could impact eligibility.

3. When shouldn’t I get a reverse mortgage?
Like all mortgages there are closing costs associated with a reverse mortgage. If you will be leaving your home in 2-3 years a reverse mortgage may not be the right choice for you. Ask us about a “cost-benefit-analysis”

4. How much money can I get?
That amount is determined by your age, equity in your home and interest rates at the time you get your reverse mortgage. During the first 12 months after closing, a borrower cannot access more than 60 percent of the available loan proceeds. In month thirteen, a borrower can access as much or as little of the remaining funds as he or she wishes.

5. What happens if I need more money?
The HECM Line of Credit Option has a growth feature After the first month of your HECM loan, the principal limit increases each month thereafter at a rate equal to one-twelfth of the mortgage interest rate in effect at that time, plus one-twelfth of monthly mortgage insurance premium rate. If your home increases in value over time a refinance with another reverse mortgage may work for you.

6. How can I save thousand$ on my reverse mortgage closing costs?
Under the HECM program, you will be charged a mortgage insurance premium (MIP) at closing that is based on the amount of funds withdrawn during the initial year. As long as you don’t take more than 60 percent of the available funds in the first year, you will be charged an upfront MIP of 0.50 percent of the appraised value of the home. If, however, you take more than 60 percent, the upfront MIP will be 2.50 percent. On a $200,000 home, 2.5 percent is $5,000 versus $1,000 if you were paying 0.50 percent.

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