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Q1: Should I stay or should I go?
Q2: What does a Reverse Mortgage Cost?
Q3: Can the lender take my home away if I outlive the loan?
Q4: Will I still have an estate that I can leave to my heirs?
Q5: Because I am only in my early 60's I can't use that much of my home equity yet, so should I wait until I am older before doing a RM?
Q6: Is my Medicare Aid affected?
A1: Most homeowners generally choose reverse mortgages so that they can remain in their current homes. The best way to decide if a reverse mortgage is for you is to compare it to the alternative of selling your home. When you make this evaluation, ask yourself these three questions:
1. How much cash can I get by selling my home and will that amount sustain me for the rest of my life?
2. How much will it cost to buy or rent a new place?
3. Is it worth the move at this point in my life, or are there other things I'd prefer to do with the money?
A2: In addition to not having any payments or having to qualify for the loan, reverse mortgage interest rates are typically lower than those for traditional home equity loans. This is another valuable benefit for those considering a reverse mortgage. The loan fees and costs incurred in obtaining a reverse mortgage can typically be offset by the money you receive from the loan. These costs will be added to the balance of the loan and must be repaid with interest once the loan terminates.
Total Annual Loan Cost (TALC)
In order for borrowers to gain a better understanding of the true cost of reverse mortgages, the federal Truth-in-Lending (TIL) law requires lenders to disclose what they call a "Total Annual Loan Cost" for the loan, also known as TALC. TALC displays the total transaction cost over the life of the loan. This makes seniors fully aware of the cost of incurring the loan. The TALC is also extremely helpful when comparing various types of reverse mortgages.
Debt Limit
Reverse mortgage debt is determined by adding all of the loan advances (this includes those used to pay off prior debt or finance the loan costs) plus the interest on your loan balance. In the end, if that total amount equals less than the value of your home when you repay the loan, then you will end up keeping the remaining amount. Should the balance of your loan ever grow to equal or exceed what your home is worth, then your total debt will be limited by that value; you can never be required to repay more than what your home is worth when the loan comes due. That simply means if today's lofty housing prices start to decline, you won't be responsible for paying back a larger amount.
Repayment
Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) become deceased, sell the home, or relocate, then the loan will be due in full, along with interest and any additional costs. In the event there are two borrowers on the loan and one should pass away, the loan would not yet be due since one of the borrowers still occupies the house.
A3: No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home's value.
A4: When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home belongs to you or to your heirs. None of your other assets will be affected by a reverse mortgage loan. This debt will never be passed along to the estate or heirs.
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A5: The FHA/HUD has set the guidelines so that when you are younger you qualify to access a smaller percentage of your home equity. So you can do your 1st Reverse Mortgage when you are younger and when you get older you could possibly refinance your RM as your home value increases and you qualify to use more of your equity; Some of the Fees that you pay on your 1st RM actually apply towards your refinance.
A6: No, a reverse mortgage will not affect your Medicare
eligibility. The Line of Credit payout option seems to be the most feasible way to receive reverse mortgage proceeds for individuals using government healthcare coverage.
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