Reverse Mortgage FAQ
We understand that there will be a great deal of questions when you are considering whether a reverse mortgage is right for your situation which is why we invite you to call us anytime day or night to go over your specific situation. However, here are some common questions you might have, but again, as a reminder, every situation is different and it is best to ask about your specific situation when you can, and why not? It’s completely free.
(1) What are the qualifications for a reverse mortgage in Colorado?
You must be 62 years or older and have 50-60% percent of equity in your home. In many instances there are options for the borrower to bring some money to the table and get a reverse mortgage done anyway if your equity is not within the ordinary range.
(2) What are the maximum amount limits on a reverse mortgage in Colorado?
The government insured home equity conversion mortgage or HECM program has a maximum mortgage limit of $726,525.00; anything higher would be considered a Jumbo Reverse Mortgage.
(3) How does a line of credit work in a reverse mortgage?
You can set up a reverse mortgage in two separate ways; you can take a lump sum or a monthly payment, or you can take an initial draw, and a year after the initial draw, the lender will make the rest of the mortgage available to you.
(4) Can you get a reverse mortgage on a manufactured home on leased land?
Yes. Reverse mortgages can be processed on a manufactured, mobile or modular home, however, there are stipulations that go with it, such as the requirement for the home to be permanently mounted to the foundation, or permanently strapped down. There should be no wheels on the unit and in most cases you must own the land; it cannot being leased land. Additionally, the mobile home should not be any older than 1980.
(5) Is it mandatory to carry mortgage insurance on a reverse mortgage?
Yes. You must have the home insured for the life of the reverse mortgage. This is one of the few requirements of the home owner, to maintain insurance. This can be paid monthly or it can be incorporated as part of the transaction prior to net proceeds and can be included with the deal where insurance is paid in full upfront.
(6) Can you get a reverse mortgage on a rental property?
Yes. As long as the property is ‘owner-occupied’ (the home owner resides in one of the units), – a duplex, triplex and/or multi-family home.
(7) What happens when a person dies or the last person leaves the house on a government insured reverse mortgage?
- The estate can pay back the money that is owed to the Reverse Mortgage lender and they will release their lien.
- The estate can sell the house pay back the lender and the estate or heirs will keep any money that is left over. (The lender usually allows six months for this to be completed. On a case by case basis they will extend it for six months)
(8) What happens is the property is sold and the amount of obtained does not satisfy the loan?
When the property is sold and more money is owed then the house sells for the FHA Mortgage insurance will pay the difference and the estate owes nothing.
(9) Can I get a reverse mortgage on a Condominium?
Yes, reverse mortgages are not limited to single-family detached homes. In many cases, you can qualify for a reverse mortgage on a condominium, but it must be your principal residence. (more on Condo reverse)
(10) How do you pay back a reverse mortgage?
You can pay the money back at any time and use the available balance as a line of credit. There is no fee to keep the line open in the event you need to borrow against it again in the future.
(11) Can you refinance a reverse mortgage?
There are factors that go into this, such as your circumstances or if the of value your home has gone up. In general, this is considered on a case by case basis. If your loan fits the criteria, yes, it can be refinanced.
(12) How much is the average cost of a reverse mortgage?
There is no one set fee. It varies greatly and your circumstances.
(13) When your house is in a reverse mortgage, can you still sell it?
Yes. You can sell your home at any time just like with a regular loan. When the property is sold, you keep what ever is left over after paying the balance on the mortgage.
(14) What is the average interest rate on a reverse mortgage?
Interest rates vary on many factors including the value of your home, your age, the age of your spouse if you have one, and other figures related with the property; it depends on your individual circumstances.
(15) What is the difference between a reverse mortgage and a home equity conversion mortgage (HECM)?
Nothing, they are one and the same. An ‘HECM’ or home equity conversion mortgage is a ‘reverse mortgage.’ You are ‘converting’ the equity in your home, into payments to you.
(16) How much more than your mortgage must your equity be for you to get a reverse mortgage?
Your equity position in your current loan should be 50% to 60% or more. In many instances there are options for the borrower to bring money to the table and still get a reverse mortgage done.
(17) How long does it take from application to closing for a reverse mortgage?
This depends slightly on the motivation of the party requesting the loan. Two steps are required; A) mandatory counseling and B) home appraisal. A motivated borrower could attend a counseling session and receive a certificate of completion within one day; then it depends on the time of the appraisal which is usually completed within two weeks, so a motivated borrower should be able to get the entire process done within 30 days.
(18) Do both spouses have to be 62 years old to qualify for a reverse mortgage?
No, the bank will base the loan off of the non-borrowing or younger spouse to ensure they live out the remainder of their life in the home.
(19) Can a widow get a reverse mortgage?
Yes, as long as they qualify.
(20) Are there any other reverse mortgages for people before the age of 62?
(21) Why do reverse mortgages have 2 deeds of trust?
Because the lender files a regular deed of trust, and an adjustable rate deed of trust with an adjustable rate rider. However, adjustable rate doesn’t change the terms. Once the terms of your reverse mortgage are set, your payments are already locked in and do not change. It only effects the interest left over on the loan.
(22) Does the escrow account cover insurance and taxes on a reverse mortgage?
There is a ‘LISA’ option which incorporates taxes and insurance for the life of the loan so these payments can be made by the lender, rather than the borrower, for the life of the loan. Of course this will effect the amount of payments. This is optional.
(23) How much does reverse mortgage counseling cost?
Typically there is no fee for counseling. Most lenders do not charge for this class. Even, for lenders who do, the cost is minimal, $125, however, our lenders do not charge for this educational resource requirement. A counseling session can take place either face-to-face or by telephone.
(24) Are monies received from a reverse mortgage considered taxable income?
No, it does not count as taxable income and will not effect your social security or your Medicaid eligibility.
(25) When you do a reverse mortgage, can you still lose your home?
No. This is one of the best and most secure parts of a reverse mortgage. As long as your insurance and taxes are paid in full each year, you are guaranteed to live in your home for your entire life.
(26) Do you have to have good credit to get approved for a reverse mortgage?
Yes, you must have what is considered ‘satisfactory credit’ to be approved for a reverse mortgage. To find out what is generally acceptable read the standard industry satisfactory credit guidelines.
(27) How do I apply online for a reverse mortgage loan?
The majority of the process of reverse mortgages are still handled in-person. You can start online by calling (720) 336-7250 or filling out this form.