Homeownership, Financing Fees ,Loan Amounts, Debt Payoff

Homeownership

With a reverse mortgage, you remain the owner of your home just like when you had a forward mortgage. So you are still responsible for paying your property taxes and homeowner insurance and for making property repairs. When the loan is over, you or your heirs must repay all of your cash advances plus interest (see “Debt Limit” below for more on repayment). Reputable lenders don’t want your house; they want repayment.

Financing Fees

You can use the money you get from a reverse mortgage to pay the various fees that are charged on the loan. This is called “financing” the loan costs. The costs are added to your loan balance, and you pay them back plus interest when the loan is over.

Loan Amounts

The amount of money you can get depends most on the specific reverse mortgage plan or program you select. It also depends on the kind of cash advances you choose. Some reverse mortgages cost a lot more than others, and this reduces the amount of cash you can get from

them. Within each loan program, the cash amounts you can get generally depend on your age and your home’s value:

• the older you are, the more cash you can get; and

• the more your home is worth, the more cash you can get.

The specific dollar amount available to you may also depend on interest rates and closing costs on home loans in your area.

Debt Payoff

Reverse mortgages generally must be “first” mortgages; that is, they must be the primary debt against your home. So if you now owe any money on your property, you generally must do one of two things:

• pay off the old debt before you get a reverse mortgage; or

• pay off the old debt with the money you get from a reverse mortgage.

Most reverse mortgage borrowers pay off any prior debt with an initial lump sum advance from their reverse mortgage.

In some cases, you may not have to pay off other debt against your home. This can occur if the prior lender agrees to be repaid after the reverse mortgage is repaid. Generally, the only lenders willing to consider “subordinating” their loans in this way are state or local government agencies.