FAQ for Concerned Sons and Daughters of Senior Parents *
We strongly recommend that you educate and inform yourself about the Reverse Mortgage and how it could help your parents to
Questions to Ask yourselves.
1. If my parent(s) have financial difficulties, will I(we) have the means to help them with their medical and living expenses?
2. Are my other siblings worried about their inheritance and the equity of the home?
3. What are my parents’ wishes as to staying at home?
Common questions and concerns
1) Will there be any inheritance left for the me(us)?
Even though the reverse mortgage’s debt increases by the accrued interest and fees, under normal circumstances, the value of a home, should be appreciating. Generally, the value of the home should be more than the debt owed.
2) Will they lose their home and our inheritance?
Neither the Lender nor the Government are in the business of taking homes from Seniors. Like with any other mortgage, owners retain 100% of the Title, a 100% percent of the time. They are free to refinance or sell the home at any time without ANY penalty. Like any other mortgage, the home serves as a guarantee for the loan.
3) Why is Counseling required to apply for a Reverse Mortgage?
For their protection the Federal Government wants to make sure that Seniors are not taken advantage of and understand the Program. It will be explained to them by an independent HUD approved Counselor. They will ask question and issue a Certificate that they have been counseled. We encourage your participation . The cost of this session in between $75 and $125 which is paid directly to the Agency. Sometimes, if requested they can collect at closing or it could be free of charge.
4) How much will they owe?*
The debt will depend on how long they live in the home. Since interest, abd mortgage insurance premium that accumulate will depend on the Plan they choose and proceeds taken as cash. Many Borrowers have chosen to pay accrued interest and fees every year so that the debt does not increase. It defeats the purpose of the Reverse Mortgage, but it is a possibility, and I have done it myself at times.
5) How can my parents or their heirs get the equity of the home?*
Let me put your mind at ease, if they, while living, or you as heirs sell the home, they or the heirs can keep any equity left after paying the debt due. If the property is refinanced or the loan paid off, the balance due is paid to the Lender and the house is yours.
6) What if the home is worth less than the amount owed?*
The Reverse Mortgage was designed by Congress so that the Borrowers or their heirs will NEVER have to pay a penny more than the lesser of the balance owed or the value of the home. In the worst case scenario, the Federal Housing Administration (FHA) who insures this Program would pay the Lender the difference between the value and the amount due. Since it is a NON-RECOURSE LOAN, neither the Lender nor the government can collect from the Borrowers any difference. In this case, Heirs can pay off the entire debt with 95% of the appraised value of the home/
7) When is the loan due and payable?
The Reverse Mortgage becomes due and payable, 50 years after Closing. or generally, when any of these things (among others) happen (read a copy of mortgage and note for more information):
1) Non payment of taxes, insurance and Association fees (if applicable)
2) Home ceases to be primary residence (ie: rented, sold, etc…)
3) Home is not maintained in an acceptable condition.
4) The last Borrower leaves the home for health reasons (could be out for up to a year).
5) The last Borrower passes away. ( heirs could have up to a year, with due diligence, to pay off the loan)
8) How does a Reverse Mortgage affect my Parents Retirement, their Social Security or Medicare?
Advances from a Reverse Mortgage is not considered income and should not affect regular Social Security or Medicare benefits. You should consult your tax or financial consultant.
9) How does a Reverse Mortgage affect my Parents needs-based Assistance Programs Benefits like SSI or Medicaid, or others?
Advances from a Reverse Mortgage are not considered income and should not affect regular SSI or Medicaid benefits. However, if the funds received are retained at the end of the month, it could affect benefits in the “resources” exceed the amount allowed. Please inform us and the HUD Counselor. You should consult your State or Federal Agency’s representative and tax or financial consultant.
10) What about the Closing Costs?
Like with any refinance transaction, there are costs involved. Title insurance and fees, Origination Fees, Mortgage and Note transfer taxes, survey, appraisal, counseling fee, and others. Among them is the FHA mortgage insurance premium, which is charged in any FHA insured transaction. When I give you an estimate of the funds, I will include a preliminary estimate of the closing cost. These are typical and are closely supervised by FHA. You also get a “TALC” (Total annual Loan Cost over the life of the loan), an Amortization Schedule, and a Loan Plan comparison. Except for the Counseling and appraisal fees (only after the counseling certificate has been received), they are paid from the proceeds at closing.
11) What can they use the funds from a Reverse Mortgage for?
There are no restrictions on how they can use the funds. Some Borrowers have paid bills and the mortgage, paid for Long Term Care Insurance, helped their grandkids education, repaired the home, traveled, etc…, or any way they like. It has also been used for estate planning purposes.
12) Borrower makes NO Mortgage payments as long as a Borrower lives the home as Primary Residence, pays property taxes, insurance, HOA fees (if applicable) and maintains it in good condition.*
If you have any questions or doubts, don't hesitate to call me at 786-262-6486 (7 days a week)
* We recommend you consult your tax, legal or financial advisor