How much money can I get?

The amount that can be borrowed is based on the following factors:

• The age of the youngest homeowner
• The appraised value of the home
• The equity in your home
• The current interest rate
• The county in which the property is located

In general, the more your equity in your home, the older you are, and the lower the interest rate, the more you'll be able to receive.

How can I receive the money?

Lump-Sum: Get all of your proceeds, after paying costs and mortgages/liens, in a lump sum after funding of the loan. Funding of the loan happens after the three day right-to-cancel period expires.

Term: Equal monthly payments for a fixed period of months that you select (i.e. you wish to receive a monthly check for 10 years (120 months)

Tenure: Equal monthly payments for as long as at least one borrower lives and continues to occupy the property as a principal residence

Line of Credit: Take cash advances whenever you choose. A line of credit has the added benefit of a growth rate.

Combination: Any combination of the options listed above.

Interest Rate

(The explanation of adjustable and fixed interest rates for the different types of HECM programs can get a little technical so be sure to call me with your questions.)

There are a variety of HECMs with different interest rates. They include adjustable interest rates that are tied to either the monthly LIBOR or monthly Constant Maturity Average of the 1-Year Treasury Bill and 10-Year Treasury Note.

There is also a fixed rate HECM (more on that later.)

The adjustable interest rates are calculated by adding a margin (currently between .65%-3.1%) to the index and depending upon which HECM program you choose, it can adjust either monthly or annually. Both the monthly and annually adjusting interest rate HECMs have lifetime caps.

In addition, each of the HECM programs has two sets of interest rates.

The initial interest rate, or the interest rate at which your loan balance will grow, has, as an index, the Constant Maturity Rate of the 1-year U.S. Treasury Bill or the monthly LIBOR depending on which HECM program you choose.

The expected interest rate, used only once to calculate your eligibility, has, as an index, the Constant Maturity Rate of the 10-year U.S. Treasury Note or the monthly Expected Swap Rate depending on which HECM program you choose.

A fixed rate HECM is also available. One of the limitations of the fixed rate reverse mortgage is the idea that you must take a lump-sum payment. For many senior borrowers the flexibility of the credit-line payment option is why may seniors tend to choose the adjustable rate HECM over the fixed rate HECM.

Note: Please do not confuse the interest rates at which your eligibility is calculated and your loan balance will grow with the credit-line growth rate.

(Now that I’ve confused you maybe you should call me. In short, the reason some seniors may choose one HECM program over another is really dependent upon their situation and goals.)

Costs

The costs of a reverse mortgage include a mortgage insurance premium (paid up-front and on a monthly basis to FHA), an origination fee, and other costs that are standard to any traditional mortgage such as title fees, attorney fees, and recording fees.

The two largest costs are the mortgage insurance premium and origination fee which each amounting to 2% of the appraised value of your home or FHA county limit, whichever is less.

In general, because of the limitation on fees set by the Department of Housing and Urban Development the difference in fees among lenders facilitating HECMs is small.

Loan Repayment

The loan is due and payable upon what is known as a ‘maturity event.’ A maturity event can be any of the following:

• The last surviving borrower permanently moves out ( you have not lived in your home for 12 months in a row )
• The last surviving borrower sells the home
• The last surviving borrower dies

Another way to look at it is that the loan is repaid when the homeowner ceases to occupy the home as a principal residence. The loan may be repaid by the homeowner or the heirs/estate, with or without a sale of the home.

The only requirement is that the loan be repaid in one payment. There is no requirement that the property be sold – only that the loan is repaid.

Repayment of the loan can be made via a refinancing of the home, sale of the home, or from other personal savings or assets.

The amount repaid can never exceed the home’s value or sale price.

Effect on Public Benefits

As currently constituted loan proceeds from a reverse mortgage are not considered income and will not affect Social Security or Medicare benefits.

However, your monthly reverse mortgage proceeds may affect your eligibility for needs based programs such as Medicaid or Supplement Security Income (SSI). You should consult with your attorney or financial advisor regarding the affect on these needs based programs.