| Reverse Mortgage Answers &
Info |
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| Common questions.
Honest answers |
| What is a Reverse Mortgage? |
In 1989, the U.S. Government, in conjunction with AARP, created
a government-insured program allowing senior homeowners a way
to tap into the equity that they have invested in their home.
This reverse mortgage program allows homeowners, age 62 or better,
an easy way to get TAX-FREE CASH by using their home's equity.
The government included some valuable safeguards to protect
seniors, too, such as independent third-party counseling and
regulated fees.
A reverse mortgage turns the equity you've built in your home
into cash. But unlike a traditional home equity loan, you don't
have to repay the loan each month. That's right, there are no
monthly repayments to make.
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| How do I get my money? |
That's your choice! The cash you receive can be paid to you
in a variety of convenient ways. You pick the method that meets
your needs:
- A single lump sum
- A guaranteed monthly cash advance
- A credit line account that allows you the flexibility
of when and how much you want to draw out
- A combination of these above methods
No matter how this tax free money is paid to you, repayment
is only due when:
- You sell your home,
- You permanently move out of your home,
- If the last surviving borrower moves or passes away.
You will retain 100% ownership and future appreciation in the
home.
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| What are the eligibility requirements? |
The eligibility requirements are that you have equity in your
home and that the borrower(s) is (are) at least 62 years old.
Since there is no monthly repayment, there are no
income or credit score qualifications for a reverse mortgage.
Plus, there are no out of pocket expenses. Actually, closing
costs are almost always paid with the proceeds from the reverse
mortgage. In fact, the amount that you see here on the website
or hear quoted from us is the amount available to you after
closing costs.
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| What is the U.S. Government's role in reverse
mortgages? |
Reverse mortgages are insured by the U.S. Government through
the U.S. Department of Housing and Urban Development (HUD).
Unquestionably, the last thing the government wants is a program
designed to help seniors that takes advantage of seniors. For
that reason, the U.S. Government has put in two very important
safeguards.
- Cap on fees and expenses - the interest rate and all
fees associated with reverse mortgages have caps on them
to protect seniors.
- Required counseling for suitability - HUD requires that
anyone getting a reverse mortgage make sure it's right for
them by getting "counseling" from a non-profit, approved
counseling agency. The counseling usually takes 45-60 minutes
and the person is issued a counseling certificate.
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| What if I already have a mortgage? |
Not a problem! If you have an existing mortgage, then the first
thing we'll do is payoff that mortgage. That will eliminate
another big monthly payment for you. It's like putting money
in your pocket, because it frees up your own money, so you can
spend it on the things you want or need.
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| Are there limitations on how I can spend
my reverse mortgage money? |
Not at all. You can spend the proceeds on anything, including
but not limited to: daily living expenses, home repairs and
improvements, medical bills, long term health care, credit card
debts, travel, presents for children and grandchildren, and
education.
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| What are the major differences between
refinancing a home with a traditional mortgage and a reverse
mortgage? |
With a traditional mortgage, monthly payments are required.
With a reverse mortgage, you won't have to make monthly mortgage
payments as long as you live in your home. In fact, a reverse
mortgage can help you avoid foreclosure if you're having difficulty
making mortgage payments. Principal and interest is not repaid
until the borrower moves out of the home or passes away. If
a married couple gets a reverse mortgage, both must pass away
(or permanently move out of the house) before the reverse mortgage
must be repaid. The only responsibilities of the homeowner are
payment of taxes, insurance and general upkeep of the home.
Also, with a traditional mortgage, you must have good credit
and qualify from an income standpoint. There are no income or
credit qualifications with a reverse mortgage. The major qualifications
of obtaining a reverse mortgage are that the borrower(s) is
(are) at least sixty-two years old and the home is their primary
residence.
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| How does my reverse mortgage get paid back? |
No repayment is due until the home is sold or the last surviving
borrower permanently moves out or passes away. When the reverse
mortgage is due, the loan balance can be paid off or refinanced
to keep the home, or the home can be sold to pay off the reverse
mortgage and any equity remaining in the home belongs to the
borrower or the heirs. Since a reverse mortgage is a non-recourse
loan, the amount owed on the loan can never exceed the value
of the home! In other words, you can never pass a debt to
your heirs because of a reverse mortgage.
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| Are there any out of pocket costs to obtain
a reverse mortgage? |
There are fees to get a reverse mortgage, but they can be financed
using the proceeds from your reverse mortgage, so that you do
not have to pay them at closing. The government has capped and
regulated all fees to be kept at a minimum.
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| Will my heirs owe anything to the mortgage
lender? |
Your heirs may either repay the loan or sell the property at
its "fair market value". No additional financial claims
may be made against your heirs or estate because the reverse
mortgage loan is non-recourse, which means that the amount owed
can never exceed the home's value.
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| How will a reverse mortgage affect my children
and heirs? |
Children and heirs will want you to have the best quality of
life available. Heirs and children will still benefit from the
remaining home equity, future home equity, and any rise in the
value of your home. A reverse mortgage gives financial independence
and control to the senior, which helps them avoid becoming a
worry for their children or heirs.
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| Do I lose any of my federal benefits by
getting a reverse mortgage? |
Although your Social Security and Medicare benefits should not
be affected, NewDay Financial recommends that you contact your
benefit providers for the best answer.
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| Is there a prepayment penalty? |
No. There is no prepayment penalty. Most reverse mortgage products
allow partial prepayment at any time.
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| Am I committed to closing my reverse mortgage
after I begin the application process? |
No. In fact, legally there is a three-day "Right of Rescission"
period after closing, in which you can submit in writing a request
to nullify the reverse mortgage.
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| Understanding
the Process |
| 5 Simple Steps |
Our goal is to make your reverse mortgage process as quick and
easy as possible for you. There are five main steps in getting
tax-free money from your house to your pocket.
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| 1. Initial phone call |
The first step is a simple phone call. We'll talk with you about
whether a reverse mortgage is right for you, how a reverse mortgage
works, the pros and cons, how much money you might receive,
and answer any other questions you might have. Then, you decide
if you are ready to take the next step to your financial independence.
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| 2. Application |
Most senior adults prefer us to meet them in person to sign
the application, however, if you prefer we can arrange to simply
mail you the application.
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| 3. Counseling |
One of the many safeguards that the government put in place
to protect senior adult homeowners is required free independent
counseling from a certified, HUD-approved counselor. We can
provide you a list of counselors to choose from. Counseling
can be accomplished through a toll-free phone call as long as
the application is done in person.
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| 4. Processing and Underwriting |
After the application and counseling are complete, then we can
begin processing your reverse mortgage loan. The process is
similar to any mortgage. We will order an appraisal to determine
the objective market value of your home. We will also order
a survey if applicable and other necessary documents for closing.
As soon as the documents are gathered from processing it is
submitted to underwriting. Underwriting will make sure that
everything is complete and ready to close for you.
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| 5. Closing |
The final step before you can get your reverse mortgage proceeds
is closing. The closing can even be done at your home if you
so choose. The only thing separating you from your proceeds
is the mandatory three day rescission period. The rest is up
to you and how you want to spend your proceeds!
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