While the basic concept of a reverse mortgage is rather simple, there are numerous factors that tend to complicate the process. New requirements, for example, are creating confusion in the marketplace and causing some seniors eligible for reverse mortgages to be turned down. That seems counterintuitive since reverse mortgages are predicated on the homeowner using existing equity to fund the mortgage. At New South Mortgage, our team of experts takes the mystery out of the approval process and works with clients to determine which reverse mortgage options best meet their needs.
How Do Reverse Mortgages Really Work?
Homeowners who’ve spent years building equity in their property have the option to access that equity using a reverse mortgage. While there are specific guidelines governing reverse mortgages, virtually anyone who has been paying their mortgage for many years will have significant equity that can be tapped. Since the factors are relatively complex, New South Mortgage routinely recommends homeowners considering a reverse mortgage contact our team to determine just how much money can be accessed for a specific homeowner’s situation.
Can Reverse Mortgages Be Used for All Owned Properties?
The short answer is no. Reverse mortgages can only be funded using the equity in a residence currently occupied by the owner. That simply means if an individual owns investment properties that are not owner-occupied, those properties are not eligible for a reverse mortgage. It always pays to get professional advice prior to deciding whether or not a reverse mortgage, otherwise known as a Home Equity Conversion Mortgage (HECM), is a good option. New South Mortgage experts work closely with clients to determine what options should be explored when a reverse mortgage is being considered. There is a great deal of reverse mortgage information to be digested before any decisions are made.
Are There Restrictions on How the Proceeds of a Reverse Mortgage Can Be Used?
No. At this point, there are absolutely no restrictions on how the proceeds can be used. Homeowners can use the funds for vacations, to cover emergency expenses, or even to purchase another property. The money can also be taken as a lump-sum payment, received as monthly installments, or used as a line of credit that can quickly be obtained as needed. That type of flexibility is great for many homeowners who may need ready access to money at irregular intervals.
Is the Approval Process Difficult?
Unfortunately, recently-expanded requirements have served to complicate the process. In the past, an approval was generally simple, but recent regulations have somewhat complicated the process. Now, homeowners must demonstrate an ability to cover expenses like taxes and insurance prior to being approved. While that’s not an issue for some borrowers, others have income sources that are not easily verifiable, which may preclude them from obtaining a reverse mortgage. In fact, reverse mortgage insuring has plummeted over a third since the new regulations were applied.
However, at New South Mortgage, our team understands the nuances of the regulations, and we work with clients to find innovative ways to access the money they’ve so carefully accumulated over the years. Unlike some of those TV lenders touting reverse mortgages, we know our state’s regulations and how they impact every one of our clients. Many of those turned down in the past by one of those big, national lenders actually qualified but were denied based on erroneous assessments by those lenders.
How Much Money Can a Homeowner Get With a Reverse Mortgage?
Generally, a homeowner with a property that’s paid off can expect to get about 80 percent of the appraised value of that property as proceeds from a reverse mortgage. However, every homeowner with significant equity is encouraged to sit down with a New South Mortgage representative to go over the details of their financial situation to determine if a reverse mortgage is a viable option.
Are There Costs Involved In Obtaining a Reverse Mortgage?
Yes. Reverse mortgages are subject to fees just as any other type of mortgage. However, not every lender assesses the same fees, so it’s important to review the fees we at New South Mortgage charge before working with another lender. We’ve helped many seniors who’ve been turned down by other lenders, and we’re proud of our expertise in the lending industry.
How Are Reverse Mortgages Repaid?
None of the funds must be repaid until the borrower dies, the home is sold, or the borrower moves. At that point, the entire balance is due. As a rule, the home is generally being sold anyway, which means there is no issue with the repayment. As noted earlier, however, borrowers must remain current on their insurance and tax payments to avoid issues with the lender. Funds remaining after the loans are repaid are distributed to borrowers or their estates.
New South Mortgage lending professionals are well-versed in the nuances of reverse mortgages. Our team members are experts at finding ways to help clients qualify for reverse mortgages. Unlike some of the large, national lenders, we understand the local economic climate and know how to use that expertise to assist our clients. Yes, there are new regulations in place, but our team fully understands the guidelines suggested by HUD and how they impact HECM reverse mortgages.
If you’re exploring your options and think a reverse mortgage might be appropriate for your specific circumstances, contact one of our team members today. We’d be happy to go over the reverse mortgage information and explain the many ways a reverse mortgage can be of benefit to you.