Reverse Mortgage FAQs
1. What is a Reverse Mortgage?
A Reverse Mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.
2. How do I qualify for a Reverse Mortgage on my Manufactured Home?
To become eligible for a reverse mortgage, you must be at least 62 years old and own your manufactured home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence. You must also receive HUD approved counseling sources prior to obtaining the loan.
3. How much money can I get?
The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your manufactured home is worth, the total amount of liens, and interest rates.The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.
4. Do I get taxed on the money I receive from my Reverse Mortgage?
The equity in your manufactured home is considered your money and not additional income. All the funds from a reverse mortgage are tax free.
5. Does my manufactured home have to be in prime condition in order for me to receive a Reverse Mortgage?
An appraiser will appraise the house following FHA guidelines or the lender's guidelines depending upon the reverse mortgage program. If the house needs to be repaired, the lender may require you to fix it prior to closing. A repair set-aside may be issued if they allow you to repair the manufactured home after closing.
6. Am I responsible for paying my homeowner's insurance and property taxes?
Property taxes and homeowner's insurance must be paid current at all times. If you choose, and if loan proceeds are available, the lender can impound your taxes and insurance and pay them for you when they become due.
7. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
8. What types of manufactured homes are eligible?
Your manufactured home must be titled as real property---meaning you own both the home and the land. Reverse Mortgages cannot be done in manufactured home communities where they pay space rent. Certain resident-owned parks qualify even if they are condoninium parks. Subdivision, Planned Unit Development and HUD approved condominium parks all meet the requirements as long as the manufactured home meets all the other provisions specified on our checklist: http://www.themanufacturedhomelendingsource.com/owner-manufactured-home-lenders
9. What’s the difference between a Reverse Mortgage and a bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The Reverse Mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with federally insured FHA Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."
10. Can the lender take my manufactured home away if I outlive the loan?
No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the home and keeps the taxes and insurance current, even if your loan becomes larger than the value of your home.
11. Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD's reverse mortgage loan. This debt will never be passed along to the estate or heirs.
12. How do I receive my payments?
You have five options:
- Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term - equal monthly payments for a fixed period of months selected.
- Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.
- Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
- Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
13. Am I limited as to how I can use the money I receive from a Reverse Mortgage?
You can use your money however you like. Borrowers have used a reverse mortgage for vacations, home modifications, healthcare, education for grandchildren, new cars and to supplement retirement income. It's your money to do as you wish.
14. Does the bank hold title to my house while my Reverse Mortgage is outstanding?
No. The person receiving the Reverse Mortgage must be on title during the course of the loan.
15. How is the interest rate determined on the Reverse Mortgage?
For the Home Equity Conversion Mortgage (HECM), the interest rate is adjusted either monthly or annually based on an index called the"1-year U.S. Treasury Constant Maturity Rate." It changes weekly. For monthly adjusting HECMs, the interest rate charged for the next month is equal to the current 1-year U.S. Treasury rate plus a margin. For the annually adjusting HECMs, the interest rate charged for the next year is equal to the current 1-year U.S. Treasury rate plus 3.1%. For the "Homekeeper," the interest rate charged is equal to the Initial Rate Index 1-Month CD plus 3.4% margin. For other products in the market, please check with your loan officer.
16. If my spouse isn't 62, will they remain on title?
All parties on title must be at least 62 in order to receive a Reverse Mortgage. If you are considering removing someone from title to obtain a Reverse Mortgage, please seek legal counsel and a tax consultant regarding your particular scenario.
17. Will Mom and Dad use up my inheritance?
While tapping into their equity, your parents' manufactured home may be appreciating in value, which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.
18. Will the bank take their manufactured home?
No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.
19. What happens to my mom and dad's manufactured home if they move into a senior care facility?
A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.
20. What costs are associated with a Reverse Mortgage?
The costs of a "forward" loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, a MIP (mortgage insurance premium) is paid to HUD on the Home Equity Conversion Mortgage (HECM), an appraisal fee, an engineer's certification fee, a doc prep fee, title and settlement fees, and other standard closing costs.
|
