1Do I Qualify for a Reverse Mortgage?

To qualify for a reverse mortgage, you and any co-borrower must be at least 62 years old, must own your home free and clear (or have a very low outstanding debt), and must occupy the home as your principal residence.

2Does my home qualify?

Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976),
condominiums, and townhouses. Co-ops do not qualify.

3How Much Money Can I Get?

The amount of funds you are eligible to receive depends on your age (or the age of the youngest spouse when there is a couple), appraised home value, interest rates, and in the case of the government program, the FHA lending limit, which is currently $625,500. If your home is worth more, then the amount of funds you may be eligible for will be based on the $625,500 loan limit. In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you can get. During the first 12 months after closing, a borrower cannot access more than 60 percent of the available loan proceeds. In month thirteen, a borrower can access as much or as little of the remaining funds as he or she wishes.

There are exceptions to the 60 percent rule. If you have an existing mortgage, you may pay it off and take an additional 10 percent of the available funds, even if the total amount used exceeds 60 percent.

4North Carolina cost of living

Like many other states, North Carolina is seeing a steady increase in the cost of living. Paying the monthly bills on a limited income can be tough. Add mortgage payments or expensive medical bills to the list and you may be barely scraping by. While you're living on a limited budget, the wealth you so wisely invested in your home's equity just sits there, doing nothing. Why not put it to use?

A reverse mortgage allows you to access that equity. North Carolina residents may qualify for either fixed or adjustable reverse mortgages, which help them to put their equity to work. You pay no interest payments or loan payments for as long as you own and live in your home and the loan only comes due if you move, sell the property, or pass away. You remain the owner of the home and must continue to pay property taxes, insurance fees, and home maintenance costs. When the loan comes due, you (or your heirs) have can sell the home to close the loan. If your heirs wish to keep the property, they can refinance the loan as a traditional mortgage.

5How can I use the proceeds from a reverse mortgage?

You can choose to receive the money from a reverse mortgage all at once as a lump sum, fixed monthly payments either for a set term or for as long as you live in the home, as a line of credit, or a combination of these.

6Who Pays the Insurance and Property taxes?

If you obtain a reverse mortgage, you remain responsible for maintenance, insurance and taxes for the home during the loan period. You can use the money from the reverse mortgage however you choose. You cannot be forced to sell or vacate the home if the money received from the loan exceeds the value of the home. In addition, should you die and your spouse is a co-borrower, he or she cannot be forced to sell the house as long as he or she occupies the home as a principal residence.

7Who owns the home when I pass?

When the borrower (and any co-borrower) dies, the loan balance plus accrued interest becomes due and payable. Your heirs may repay the loan and keep the home, or sell the home, repay the loan and keep the balance. If the loan exceeds the property value, your heirs will owe no more than the property value, and no additional financial claims can be made against them or the estate.

8What if I have an existing mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing indebtedness must be paid off. You can pay off the existing mortgage with a reverse mortgage, money from your savings, or assistance from a family member or friend.

For example, let's say you owe $100,000 on an existing mortgage. Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish.

9Will I lose my government assistance if I get a reverse mortgage?

A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or Supplemental Security Income (SSI), any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain count as an asset and could impact eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, you should contact the local Area Agency on Aging or a Medicaid expert.

10What are My Payment Plan Options?

You can choose to receive the money from a reverse mortgage all at once as a lump sum, fixed monthly payments either for a set term or for as long as you live in the home, as a line of credit, or a combination of these.

11How does the interest work on a reverse mortgage?

With a reverse mortgage, you are charged interest only on the proceeds that you receive. Both fixed and variable interest rates are available. Rates are tied to an index, such as the 1-Yr. Treasury Bill (T-bill) or the London Interbank Offered Rate (LIBOR), plus a margin that typically adds an additional one to three percentage points onto the rate you're charged. Interest is not paid out of your available loan proceeds, but instead compounds over the life of the loan until repayment occurs.

12I elected to receive monthly payments, when will those monthly payments commence?

Your first monthly payments are to be sent to you the first business day of the month following your loan funding date. For example, if your loan closed at the end of May and your loan funded in June, then your first monthly payment will be issued the first business day of July. If your loan closed in June, and your loan funded in June, then your first monthly payment will be the first business day of July

13What does “non-recourse loan” mean?

Most reverse mortgage loans are considered “non-recourse loans." This means that you can never owe more than the value of your home at the time you or your heirs sell your home to repay your reverse mortgage. If your loan is a Home Equity Conversion Mortgage ("HECM"), the reverse mortgage debt may be satisfied by paying the lesser of the mortgage balance or 95% of the current appraised value of the home.

If you need any additional information or questions answered, please contact me at the phone number below. Office: (919) 424-6040

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