Reverse Mortgage Information

In the twilight years of retirement, seniors are usually under financial pressure. There seems to be a need to cut down on expenditures as far as possible, while improving the sources of money to be as many as possible. A reverse mortgage is a good option to go for, to raise money to meet living requirements during the retirement years. There are no requirements of passing credit score, and there is income proof required either, in order to qualify for a reverse mortgage.

The only requirement is that the borrower needs to be of minimum age 62, and have sufficient equity in a home property. The HUD insures more than 90% of all reverse mortgages. The reverse mortgages are non-recourse loans so the borrower cannot owe more than a home’s market value. For example, even when a senior uses the value of a reverse mortgage to the tune of $200,000, if the home is valued at $180,000 when the senior passes away, then that is the amount that becomes repayable to the lender, and nothing more.

There are costs associated with a reverse mortgage; there is an origination fee to be paid, which is 2% of the first $200,000 and then 1% of the remaining amount up to a cap of total $6000. The minimum origination fees are $2000 which has been set to increase to $2500.

There is also a Mortgage Insurance Premium to be paid, or MIP, which is 2% of the lesser of the National lending limit or the value of the home. The maximum MIP is capped at $8340.

The borrower can choose between a fixed rate and an annually adjusting rate reverse mortgage. The downside to a fixed rate reverse mortgage is that it requires the borrower to take the entire amount in a lump sum, which means that the full amount starts accumulating interest from day one of the start of the loan.

To get approved for a HUD reverse mortgage, the senior borrower needs to go through an independent counseling process from a qualified HUD counseling agency. The borrower pays for the counseling up front, or the costs can be deducted from the equity, this counseling fee is currently set at $125.

Only FHA approved loan officers are able to originate reverse mortgages. Only FHA-approved appraisers can be used to appraise homes in this transaction.