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Basics Fact Sheet on Reverse Mortgages

Until recently, there were two main ways to get cash from your home:
   · you could sell your home and move; or
   · you could borrow against your home, but then you would have to make monthly loan repayments.
Reverse mortgages give you a third way of getting money from your home. And you don't have to leave your home or make regular loan repayments.
    · A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live there. It can be paid to you all at once, as a regular monthly advance, or at times and in amounts that you choose. You pay the money back plus interest when you die, sell your home, or permanently move out of your home.

Who's Eligible
You need to be least 62 years of age and own a home (a present mortgage on your home is typically paid by the reverse mortgage), then you may apply for the reverse mortgage. Owners generally must occupy the home as a principal residence (where they live 6 months out of the year–not necessarily consecutively).

How They Work
The HECM FHA reverse mortgage loans requires no repayment for as long as you live in your home. But they must be repaid in full, including all interest and other charges, when the last living borrower dies, sells the home, or permanently moves away.
You can never owe more than your home's value at the time the loan is repaid.
Reverse mortgage borrowers continue to own their homes. So you are still responsible for property taxes, insurance, and repairs.

What You Get – besides peace of mind
These loans can be paid to you all at once in a single lump sum of cash, as a regular monthly loan advance or as a creditline that lets you decide how much cash to use and when to use it. Or you may choose any combination of these payment plans.

The amount of cash you can get from a HECM FHA reverse mortgage generally depends on your age, your home's value and location, and the cost of the loan.

Most homeowners get the largest cash advances from the federally insured Home Equity Conversion Mortgage (HECM). HECM loans often provide much greater loan advances than other reverse mortgages and are federally guaranteed.

What You Pay
Loan costs typically include an origination fee, closing costs, insurance, and a monthly servicing fee. These costs generally can be paid with loan advances, which mean they are added to your loan balance (the amount you owe). Interest is charged on all loan advances.
The federally insured Home Equity Conversion Mortgage (HECM) is generally the least expensive private sector reverse mortgage.
Taxes, Estates, and Public Benefits
An American Bar Association guide states that generally "the IRS does not consider loan advances to be income." The guide explains that if you receive SSI, Medicaid, or other public benefits loan advances are counted as "liquid assets" if you keep them in an account past the end of the calendar month in which you receive them. If you do, you could lose your eligibility for these programs if your total liquid assets (for example, money you have in savings and checking accounts) are greater than these programs allow.

Creative Uses of a Reverse Mortgages
(Also known as a Home Equity Conversion Mortgage or HECM

Generally speaking, a reverse mortgage can be used in almost any way you choose. It is up to you to determine the best way to use your money.
     However, reverse mortgages offer particular financial advantages when used by seniors as a financial planning tool.

 Consider the following uses of a Reverse mortgage: 
 

• Reverse mortgage can be used to fund for Healthcare or Medical Treatment
  Long term care is a big risk to most seniors' financial planning for retirement.
  While 42 percent of people over the age of 65 require or will require long term health care,     neither Medicare nor supplemental medical insurance cover the costs of these services -            either in your own home or in a nursing facility. Moreover, most seniors don't have long term care insurance.
  Using a reverse mortgage to pay for medical costs and/or insurance can be an important in order to protect your assets and secure the benefits for you and your heirs.
  

Some Assets Protection Strategies – Leaving Something to Your Heirs

• You might consider using the proceeds from a reverse mortgage to fund a life insurance product. This is particularly useful if you have built up significant home equity.
• Funding a life insurance policy with a reverse mortgage can help give you control over your estate and assures the legacy you leave retains its value by.

If you have equity in your home, you may want to explore how a reverse mortgage could be an important component of your estate plan. We suggest you talk to an independent certified financial advisor or your legal counsel for their advice before proceeding.

Let us know if you need a reference for a Financial Planner, Long Term Care Insurance Provider, Life Insurance Provider or Attorney.