Reverse Mortgages

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Reverse Mortgage

 
What is a Home Equity Conversion Mortgage (HECM)?

A Home Equity Conversion Mortgage (HECM) is a government-insured reverse mortgage. HECM loans offer many different options on interest rates, how much money you can access, and how you receive your payments. HECMs can have variable or fixed interest rates.

 

 
Are there options that lower the up-front costs of a reverse mortgage?

MetLife Bank recently introduced HECM Saver, a new HECM reverse mortgage that significantly reduces up-front costs as compared to the HECM Standard reverse mortgage.

 

 
What is the difference between a HECM Saver and a HECM Standard reverse mortgage?

With the HECM Saver reverse mortgage, the required up-front mortgage insurance cost is greatly reduced as compared to the HECM Standard reverse mortgage. This can save the average homeowner age 62 and older thousands of dollars. While the maximum amount of money the homeowner can borrow is less than with the HECM Standard, the lower up-front costs of the HECM Saver may make it an attractive option. The HECM Standard, on the other hand, may be more desirable for those who need the maximum amount of money available to them. Both the HECM Saver and the HECM Standard are government-insured reverse mortgages.

 

 
What are the basic requirements for a reverse mortgage?

To qualify for a reverse mortgage, you must be age 62 or older and own your home (houses and condos qualify; those with existing mortgages may also qualify). Your home must be your principal residence and meet U.S. Department of Housing and Urban Development (HUD) minimum property standards.
 

 
How is a reverse mortgage different from a home equity loan?

Both a reverse mortgage and a home equity loan use the equity you have in your home to generate cash. However, with a home equity loan, you need to make monthly payments on the principal and interest. With a reverse mortgage, you don't need to make monthly mortgage payments for as long as you stay in the home. The loan is repaid only after you permanently leave the home.
 

 
How much money can I get?

The amount you can borrow depends on several factors, such as:

  • Your age

  • Type of reverse mortgage you select

  • Current interest rates

  • Location of your home

  • Appraised value of your home

  • Federal Housing Administration (FHA) lending limits for your area

 

 
How can I receive the cash from a reverse mortgage?

You have a range of options:

  • Lump sum

  • Monthly payments

  • Line of credit (take funds when you need them)

  • A combination of the above

 

 
How can I use the proceeds?

You can use the proceeds for the things you need and want. Common uses include paying monthly bills, fixing up your home, paying for prescriptions and health care, making a major purchase, traveling, helping children or grandchildren, and planning for the unexpected. Please note that MetLife does not recommend or encourage the use of reverse mortgage proceeds to fund new or existing investment or annuity products.
 

 
What if I still owe money on a first or second mortgage?

You may still be eligible for a reverse mortgage depending on the amount of your remaining mortgage versus the value of your home. The funds from the reverse mortgage would first be used to pay off whatever existing mortgages you have on the property.
 

 
Will my current income affect my eligibility?

No. You don't make monthly repayments with a reverse mortgage, so there are no income qualifications.
 

 
How will a reverse mortgage affect my government benefits?

The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits. However, needs-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be impacted. A MetLife Bank reverse mortgage consultant can provide additional general information, but you should contact a tax professional about your particular situation.
 

 
Are interest rates fixed or variable?

Most reverse mortgages have variable rates that are tied to a financial index and will vary according to market conditions and product. MetLife Bank offers both variable and fixed-rate reverse mortgages. Note: in a rising interest rate market, the balance on a variable-rate reverse mortgage will grow more quickly than on a fixed-rate reverse mortgage.
 

 
Can a reverse mortgage be refinanced?

Yes, refinancing is possible. This option can be advantageous if the home increases in value, making more equity available.
 

 
In addition to the interest, are there fees associated with a reverse mortgage?

Most reverse mortgages have an origination fee, closing costs, a mortgage insurance premium, and a monthly servicing fee. These can be paid from the proceeds of the reverse mortgage itself, so there is no immediate burden to you. The costs are added to the principal and paid along with the interest accrued on the total principal balance when the loan becomes due.
 

 
What has to be repaid when the loan becomes due?

The loan balance-including any fees that have been added to the principal and the accrued interest on the total principal balance-needs to be repaid. This is usually done through the sale of the house or other assets. Repaying the reverse mortgage through a conventional mortgage is also an option.
 

 
When will the principal and interest charges become due?

The reverse mortgage loan must be paid in full when one of the following occurs:

  • All borrowers permanently move out of the home

  • The last surviving borrower passes away, sells the home, or fails to live in the home for 12 consecutive months

  • You fail to pay property taxes or insurance

  • You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problem

 

 
What if one of the co-borrowers passes away?

The surviving borrower can continue to own and live in the home-and enjoy all the benefits of a reverse mortgage.
 

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