Terms of Use
 

 

Basic Questions

Q:  How much cash can I get?  
A:  Most homeowners can obtain approximately 50 to 60 per cent of their equity, up to about $200,000. (However, this ballpark figure depends on a number of factors, including your age, the home's location, your home's value, and current interest rates.)

Q:  How is the money from a reverse mortgage paid to me?   
A:  You have a number of options: Lump Sum; Line of Credit; Monthly payment; or any combination these. There are also several flavors of the monthly payment option.

Q:  Am I eligible?
A:  You are probably eligible if you are at least age 62, with at least $50,000 of equity in your home.

Q:  Can I have an existing mortgage?
A: Yes, but at least 70 per cent of any existing mortgage should be paid. Any mortgage balances are transferred to the reverse mortgage.

Q:  How do I decide which loan is best?
A:  That’s easy, the one that gives you the most money is the best loan. More than likely, that is a FHA-insured Home Equity Conversion Mortgage (HECM), but use this book to be sure.

 

Love, Romance, and the Reverse

Q:  What if the home is owned by a couple?
A:  A home owned by a couple has both advantages and disadvantages. First, the good news: You are expected to live longer (Assuming you are happy with the relationship). The bad news is that, because you are expected to live longer, you will receive less money. In the case of a couple, the loan amount is usually calculated based on the age of the younger partner. 
(In some cases, the loan is based on an average of the two partners' ages.)

 

Effect on Other Programs

Q:  Will I pay income tax on the money from a reverse mortgage?
A:  No. It’s a loan, not income.

 

Future Circumstances -- What If?

Q:  What if I change my mind about how to take my money?
A:  This is a very common situation. If you change your mind, you can usually change the way you’re taking the money (either Lump Sum; Line of Credit; Monthly payment; or any combination these). To do so usually costs less than $50 (to revise the paperwork), and after the change is made, the lender then sends you a new loan schedule.

 

Rules of Thumb

Q:  What are the most common uses for the money?
A:  The most common uses are to:

  • Fund home health care;
  • Add ramps, lower bathtubs, etc., to make a home more accessible; 
  • Take vacations;
  • Purchase one or more second homes; or
  • Supplement other income to meet normal living expenses.

Q:  What are the most common reactions of adult children? How can I address their concerns?
A:  The most common reaction is a positive one. For adult children, it can be a mix of good and bad news.

The good news for an adult child is that:

  • It is good for you, their parent;
  • You do not need their financial assistance;
  • You won’t be moving in with them out of financial desperation; and
  • You, the parent, get to keep control of your own life.

The bad news for an adult child is that:         

  • Their inheritance will likely be less (particularly if the house does not appreciate); and
  • They may worry that you won't live in the house long enough for this to make sense.

 

If you are just looking for a short answer, as a rule of thumb, there is an entire section called Quick Answers in the book.


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