Top 10 Reverse Mortgage Questions & Answers

Welcome to Frontier Financial of Arizona! Here are the top 10 questions we receive about reverse mortgages, answered by Traci Ranic, "The Loan Arranger."

1. What is a reverse mortgage?

A reverse mortgage is a loan for homeowners aged 62 or older that allows them to convert part of their home equity into cash. Unlike traditional mortgages, reverse mortgages do not require monthly payments. The loan is repaid when the homeowner sells the home, moves out permanently, or passes away.

2. How does a reverse mortgage work?

With a reverse mortgage, you receive funds from your lender based on the equity you have in your home. These funds can be received as a lump sum, monthly payments, a line of credit, or a combination of these options. The loan balance increases over time, and repayment is deferred until a qualifying event occurs, such as selling the home.

3. Who is eligible for a reverse mortgage?

To qualify for a reverse mortgage, you must be at least 62 years old, own your home outright or have a significant amount of equity, and live in the home as your primary residence. The home must meet FHA property standards, and you must have the financial resources to maintain the home, including paying property taxes, insurance, and maintenance costs.

4. What are the benefits of a reverse mortgage?

  • Financial Flexibility: Access your home equity to cover expenses like long-term care, home modifications, or daily living costs.
  • Stay in Your Home: Continue living in your home while using its equity.
  • No Monthly Mortgage Payments: Reverse mortgages do not require monthly mortgage payments.
  • Tax-Free Proceeds: The funds received are generally tax-free.
  • Home Purchase Option: Use a reverse mortgage to buy a new home without monthly mortgage payments.

5. What are the costs associated with a reverse mortgage?

Reverse mortgage costs can include origination fees, mortgage insurance premiums, closing costs, and servicing fees. These costs can be financed into the loan, so you do not need to pay them out of pocket. However, it is essential to understand these costs and how they impact your loan balance.

6. Will I still own my home with a reverse mortgage?

Yes, you retain ownership of your home with a reverse mortgage. The lender does not take ownership; they simply have a lien on the property as security for the loan. You must continue to meet loan obligations, such as maintaining the home and paying property taxes and insurance.

7. Can I lose my home with a reverse mortgage?

You can remain in your home as long as you meet the loan requirements, such as living in the home as your primary residence, maintaining the property, and paying property taxes and insurance. Failure to meet these obligations can lead to default and potential foreclosure.

8. How much money can I get from a reverse mortgage?

The amount you can receive from a reverse mortgage depends on several factors, including your age, the value of your home, current interest rates, and the amount of equity in your home. Generally, the older you are and the more equity you have, the more funds you can access.

9. What happens to the reverse mortgage when I pass away or sell the home?

When you pass away or sell the home, the reverse mortgage becomes due. The loan balance is typically repaid from the proceeds of the home sale. Any remaining equity after paying off the loan belongs to you or your heirs. If your heirs wish to keep the home, they can pay off the loan balance using other funds.

10. How do I get started with a reverse mortgage?

To get started with a reverse mortgage, contact Traci Ranic at Frontier Financial of Arizona. She will guide you through the process, starting with an initial consultation to discuss your needs and goals. Traci will explain the details of reverse mortgages, answer any questions, and help you determine if this option is right for you.