Reverse Mortgage FAQ: Important Questions Many Seniors Forget to Ask

While researching reverse mortgage information, most seniors ask the same few questions. Many seniors want to know how to qualify, how much they can borrow, and whether a reverse mortgage is their most beneficial option. These questions, however, are not the only ones that consumers need to be asking. For the answers to several important but less commonly asked questions, consult the following reverse mortgage FAQ: Reverse Mortgage FAQ: What If Both Borrowers Are Not 62? To qualify for a reverse mortgage, both borrowers must be at least 62 years of age. If there are two individuals listed on the title of a home, both will be considered when determining reverse mortgage eligibility. If only one borrower is 62, the younger borrower must be taken off the title of the home for the couple to qualify. Unfortunately, this scenario can be problematic. If a reverse mortgage is taken out in one spouse’s name, the loan will become due upon his or her death. The younger spouse would then be responsible for repaying the reverse mortgage. Unless there are special circumstances, couples should wait to take a reverse mortgage until both parties are 62. Reverse Mortgage FAQ: How Much Equity Does a Borrow Need to Qualify? Being a 62-year-old homeowner does not necessarily qualify a person for a reverse mortgage. To qualify, seniors must have enough equity in their home to cover their remaining mortgage balance with the proceeds of their reverse mortgage. Generally speaking, a borrower’s loan to value should be around 60%. This means that borrowers need at least 40% equity when considering their home’s current value. Of course, this is just an estimate. The exact amount one needs to qualify will also depend on the borrower’s age. The younger a borrower is, the more equity he or she will need to qualify. Reverse Mortgage FAQ: What Happens Once the Loan Closes? After the final documents have been signed, borrowers have three business days to cancel their loan. Once this three-day window has passed, the lender will send the necessary funds to the title company. The title company will pay any existing liens on the property and distribute the appropriate funds to the borrower or servicing company. Reverse Mortgage FAQ: How Do Borrowers Repay Their Loan? A reverse mortgage will not become due until the borrower dies or sells the home. In most cases, reverse mortgage balances are paid through the sale of the home. Once the home is sold by the borrower or borrower’s heirs, the lender will be repaid using the proceeds of the sale. Reverse Mortgage FAQ: What If Borrowers Owe More than Their Home is Worth? Reverse mortgages are known as non-recourse loans. This means that borrowers cannot be forced to pay more than their home is worth. If a home sells for less than the reverse mortgage balance, the remaining balance will be forgiven. While there are dozens of questions that could be asked regarding reverse mortgages, this reverse mortgage FAQ should answer a few less commonly asked questions. To make the most beneficial decision, seniors should make sure all their questions are answered prior to taking a reverse mortgage.