Reverse Mortgages – Ask the Expert

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By Alain Valles, CRMP, CSA, MS, MBA (Photo Alain Valles, Photo submitted)

You are invited to ask the questions. No question is too trivial or too complex. The only way to make an informed decision whether a reverse mortgage is right for you is to obtain the correct information regarding your personal situation.

Reverse mortgages are government-insured loans that allow qualified homeowners the option to convert illiquid home equity into tax-fee cash. Reverse mortgages have become a credible option to remain financially independent during retirement. Here are the top ten common questions:

  1. “How old must I be?” At least one borrower must be at least 62 years of age. A spouse under 62 years of age is allowed and, subject to guidelines, would be allowed to remain and own the home if the older spouse predeceases.
  1. “How much money is available?” It depends. It depends on the age(s) of the homeowner, property value, balance(s) of any existing mortgage(s), income, and credit history. You’re invited to contact us for a detailed explanation and calculation of what is available.
  1. “Must I make a monthly payment?” Unlike conventional mortgages that require a monthly payment, reverse mortgage give you the option to never make a monthly mortgage or interest payment thereby increasing your monthly cash flow. Note – you are required to remain current on property taxes, homeowner’s insurance, and any other property charges.
  1. “If I make no monthly payments, what happens to the reverse mortgage loan balance?” The balance will grow over time. Each month the interest on the reverse mortgage will be added to the reverse mortgage balance.
  1. “How is a reverse mortgage paid back?” The primary ways a reverse mortgage are paid off is to sell the home while the borrower is alive, or upon their passing, with any profit retained by the borrower or the estate. Or, heirs may choose to retain ownership of the home by paying off the reverse mortgage with other assets.
  1. “Are reverse mortgages expensive?” It depends. Compared to what? They are more expensive than a conventional loan but much less expensive than moving. Each situation is unique so please contact us for a comparative analysis.
  1. “Will I lose my home?” With a reverse mortgage you retain full control and ownership of your home. You may sell your home at any time with no prepayment penalty and any profit is yours.
  1. “How may I receive reverse mortgage proceeds?” Options include cash when the loan closes, a monthly distribution, access to a line of credit that is guaranteed to grow over time, or a combination of the three. Please call for details.
  1. “Will I qualify if I currently have a mortgage?” There is no requirement for your home to be free and clear.
  1. “Where do I get unbiased information?” Obtain your free “How to Use Your Home to Stay at Home” 36-page book. This is the official reverse mortgage consumer booklet approved by the U.S. Department of Housing & Urban Development and published by the National Council on Aging. This is a great place to get basic information.

Please give me a call or email with your questions and to receive your free copy of “Use Your Home to Stay at Home.”

Alain Valles is Managing Director of Helping Hands Community Partners, Inc. and was the first designated Certified Reverse Mortgage Professional in New England. He obtained a Master of Science from the M.I.T. Center for Real Estate, an MBA from the Wharton School, and graduated summa cum laude from UMass Amherst. Valles can be reached directly at 781-724-6221 or by email at [email protected]. For more stories visit www.communityadvocate.com.