Common Questions & Answers

Q. Do I have to be a certain age to be eligible for a reverse mortgage?

A. All parties on title must be at least 62 years old, and the mortgage is based upon the youngest borrower's age.

Q. Will I still retain title (ownership) to my home?

A. Yes, you retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage.

Q. What types of homes are eligible?

A. Your home must be a single-family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums, and some manufactured homes are eligible. Condominiums must be FHA-approved.

Q. What are my payment option choices?

A. The benefits can be taken in various ways: a lump sum, a monthly payment, a term (certain amount of years) or a line of credit. The unused portion in the line of credit grows with the HECM loan. You can also do a combination of plans (i.e., a monthly income AND a line of credit).

Q. What are the fees or costs involved?

A. There are fees and costs to set up the Reverse Mortgage, however, these are typically included as part of the loan balance, which can be financed. FHA charges 2% of the appraised value or the maximum lending limit, whichever is less. Then there is an origination fee and the normal closing fees, such as title, escrow, recording, appraisal, termite, etc.

Q. How will the interest rate affect my payments?

A. The interest rates will be set the week that we close the loan. If you are getting a monthly payment, the payment will be set regardless of the interest rates. The interest rates affect the balance of how much is due at the end of the loan term. The interest on this loan adjusts monthly.

Q. What is the monthly servicing fee?

A. The servicer charges a monthly fee for servicing the loan. When the loan closes, there is an amount "set aside." It is called a "servicing set aside." This way, the servicer doesn't have to go to the borrower every month to request money. Fannie Mae distributes the monthly fee to the servicer for that particular borrower on a monthly basis.

Q. Are my proceeds from a reverse mortgage considered tax-free?

A. The American Bar Association guide states that generally "the IRS does not consider loan advances to be income." Basically, you are drawing from your own principal, which is not considered a tax event. However, you should always consult your tax advisor regarding taxes, public benefits and deductibility of interest with regard to your reverse mortgage proceeds and how this could potentially affect your estate and heirs.

Q. Will the reverse mortgage affect my Social Security or other Federal benefits?

A. Your Federal benefits should not be affected.

Q. What about SSI and state benefits such as Medicaid?

A. If you receive SSI, Medicaid, or other public benefits, these loan advances are counted as "liquid assets" if you keep them in an account past the end of the calendar month in which you receive them. If you do, you could lose your eligibility for these programs if your total liquid assets (for example, money you have in savings and checking accounts) are greater than these programs allow.

Q. Do I still pay property taxes and insurance?

A. Yes! You must still pay property taxes and maintain hazard insurance.

Q. How do I receive my payments?

A. You can receive your payments with a monthly check, or an automatic deposit that you would receive like your Social Security check. If you want the money deposited directly into your account, we would need a voided check to submit to the servicer.

Q. Who services and sends me my payments?

A. Generation Mortgage services all of their loans: We'll send your monthly payments out on the 1st of every month and should be arriving about the same time as Social Security payments. Our Servicing Department is located in Atlanta, GA.

Q. Who arranges for the appraisal?

A. We will arrange for an FHA-approved appraiser. A copy of the appraisal will be included in your closing documents.

Q. What happens to my spouse if I pass away first?

A. If your spouse is a co-borrower of the loan, he or she can continue to live in the house, and continue to receive the existing benefits. Repayment would not be required until your spouse passed away or decided to move. At that time, the loan balance would be due and payable.

Q. If I choose to receive the regular monthly payments, will the reverse mortgage stop paying me once I have reached a certain age or once I have received a certain amount of money?

A. If tenure is selected, you will continue to receive the same monthly payment for as long as you live in your home. If term option is selected, payments will end at a certain age.

Q. What if I decide to sell my home?

A. If you choose to sell your home, the outstanding loan balance becomes due and payable. You or your estate will receive any proceeds exceeding the loan balance.

Q. If my home appreciates during the mortgage term, who will be entitled to that money?

A. Under the FHA Home Equity Conversion Mortgage (HECM) program, you are to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.

Q. Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?

A. Absolutely not! As long as you continue to occupy the property as a principle residence, you will not be forced to sell or vacate your home – even if the total of the mortgage payments made to you, plus interest, exceed the value of the property. No deficiency judgment may result from your loan. FHA or Fannie Mae insurance covers any further financial obligation to the lender. THE HOUSE STANDS FOR THE DEBT!

Q. What if I move out for a while, will the loan become due?

A. FHA's policy states that if a borrower is out of the house for 12 consecutive months, he or she will probably not be coming back and the loan becomes due.

Q. When is the loan due?

A. When none of the borrowers are remaining in the home, the loan is due, or you may choose to pay off the loan early. The family or heirs can sell the house or refinance the house and pay off the loan as with any other loan on the property.

Q. How much will I owe at the end of my loan?

A. All the money borrowed, including any money used to pay loan-closing costs. Additionally, all accrued interest, financial and service fees and MIP (HECM).

Q. What if I owe more money than the home is worth?

A. If the loan balance is greater than the value of the home, the family can give the house back to FHA or Fannie Mae. It is a non-recourse loan, which means the house stands for the debt. There will NEVER be a debt to your heirs. If there is money left after paying off the existing loan, the family, heirs or estate receive the money.

Q. Will I still have an estate that I can leave to my heirs?

A. When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you receive from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by your reverse mortgage loan. This debt will never be passed along to the estate or your heirs.

Q. How long do the heirs have to sell the property?

A. As long as the heirs are marketing the property in good faith, the servicer will allow three-month periods, up to one year on the FHA product.