Your Best Idaho Reverse Mortgage Questions Answered
Since its inception in the mid-1900s, the reverse mortgage market has grown at a rapid rate. Although it’s been around for a little over three decades, it still maintains an air of mystery. In fact, it’s likely that you’ll have plenty of questions that you don’t know who to ask.
Are you looking to get a reverse mortgage in Idaho? You’ve come to the right place. At Idaho Reverse Mortgage, we’ve compiled a list of all the questions you might have regarding most reverse mortgages in your state.
From the application process to the benefits of a reverse mortgage, and even what happens when you pass away, we have you covered. Let’s dive right in!
What is a Reverse Mortgage?
Reverse mortgage loans are an excellent option for people over the age of 62 looking for supplemental income, but are at an age when working three jobs to sustain a comfortable living is not an option.
In the past, aside from a person’s line of credit, social security income, and savings account, older generations did not have many options for income. If they still owed monthly payments on their existing mortgage, this could diminish a person’s ability to enjoy the last quarter of their life with security.
It could mean that they needed to move out of their homes and downsize in order to afford property taxes, homeowners insurance, and survive.
Enter reverse mortgages.
Reverse Mortgages were created as a way for older generations to be able to rest assured that they would always have a roof over their head. Their roof. They were created as a way to supplement income by essentially selling the home equity back to the bank.
How Do Reverse Mortgages Work?
When you become a reverse mortgage borrower, instead of making payments to the bank to pay off your house, the bank will absorb your home loan balance and also take ownership of your home.
Essentially, you are trading the equity of your home for a supplemtal income that is dispersed into equal monthly payments to you. You also have the option of being paid in one lump sum or through a line of credit.
Your reverse mortgage proceeds to become your income. Though, keep in mind that as your loan balance increases, your home equity decreases.
You’ll want to make a thorough financial assessment of whether a reverse mortgage loan agreement is right for you. But where do you start?
There are several factors that reverse mortgage lenders use to determine how reverse mortgages are calculated. Areas taken into account are:
- Your home’s appraised value
- Your loan’s interest rate
- Your youngest eligible spouses age
- Your mortgage loan balance
Once the total annual loan cost has been calculated, your reverse mortgage specialist will help you decide what type of reverse mortgage works best for you and your family. A reverse mortgage counselor can help guide you to the best type of reverse mortgage for you.
Types of Reverse Mortgages
Proprietary Reverse Mortgage: Instead of a reverse mortgage that a federal government agency funds, Proprietary Reverse Mortgages are funded by private lenders. This option is usually exercised when the appraised value of a home is higher, allowing the reverse mortgage borrowers to benefit from a higher payout.
Home Equity Conversion Mortgage (HECM): They are perhaps the most popular type of reverse mortgage loan mainly due to the fact that they carry no income limitations. There are many perks to a HECM loan. You can use the loan for whatever you want and there are no medical requirements. Because of this, Home Equity Conversion Mortgages (HECMS) usually come at a higher cost.
Single-Purpose Reverse Mortgage: What sets this option apart from the others is that the money borrowed from the lender must be used in a specific way that is approved by the lender. For this reason, single-purpose reverse mortgages are harder to come by.
Jumbo Reverse Mortgage: This is specialty reverse mortgage loan for homeowners whose home value is appraised above the Home Equity Conversion Mortgage (HECM) limit of $726,625. You may also see this called a “proprietary reverse mortgage” too.
Specifically this targets homeowners who have higher-value homes and therefore have more equity to tap into. Jumbo reverse mortgages allow homeowners to access up to 6 million dollars worth of their home’s equity. The exact amount you can borrow varies depending upon your age, the value of your home, and how much you currently owe on the home.
Types of Mortgage Payouts
- Lump Sum Payment
- Line of Credit
- Fixed Monthly Payments
- Combination of These Options
Do I Qualify for a Reverse Mortgage?
There are a number of qualifications that a reverse mortgage depends on. The first qualification is that you must be at least 62 years old. You also must own a majority of your home. Most mortgage lenders would prefer that you own your home outright. However, as long as you don’t have an outstanding loan balance that can’t be covered by the reverse mortgage process, you do qualify.
If you are curious as to how much money you qualify for, you can use a Reverse Mortgage Calculator to help determine if meeting with a lender is worth your time.
What Are My Obligations?
When you have a reverse mortgage contract, you are still responsible for the typical mortgages fees including:
- Origination fees
- Mortgage Insurance Premiums
- Other Closing Costs
- Servicing Fees
- Interest Rates
These may seem like a lot of loan expenses, however, these fees can be absorbed into the reverse mortgage work.
Other obligations are that you are still required to pay property taxes on time and maintain your homeowner’s insurance. Lastly, you are required to live in the property as your principal residence.
Who Benefits From a Reverse Mortgage?
In the end, reverse mortgage borrowers and their heirs can benefit from a reverse mortgage. Those monthly mortgage payments can be used for family vacations or to improve your quality of life- it all depends on what your long-term goals are.
Many times, things to consider are inheritance vs. experience and what you want your life experience to entail. When the borrower dies, the reverse mortgage may be satisfied by the borrower’s heirs taking on the remainder of the mortgage, meaning they can still keep the house.
How Do I Avoid Reverse Mortgage Scams
If you do find yourself a victim of a reverse mortgage scam, there are numbers you can call.
The Consumer Financial Protection Bureau can be reached here and they will aid you in making sure that you are being treated fairly by the banks and can refer you to a FHA approved lender who specializes in home equity loans and reverse mortgages.
Because not all lenders are reverse mortgage lenders specifically, it is a best practice to speak with a reverse mortgage specialist before commencing with selling your home equity loan.
Are You Ready For Your Reverse Mortgage?
There are a lot of questions to answer when deciding whether or not a reverse mortgage is right for you. If you’re thinking about getting one you’ll want to speak with qualified professionals who can help you make an informed choice. That’s why we’ve been recognized as Idaho’s leading provider of reverse mortgages. Don’t hesitate to give us a call today, or visit our website now to learn more!