iReverse Home Loans
is proud to announce that Brian Cooper, a nationally recognized reverse mortgage expert, has agreed to be the moderator of “Ask the Expert.” Brian has been featured on numerous radio and television talk shows as a reverse mortgage expert/advisor.
Anne M. (Stuttgart, AR)
Question: I was told that when the loan balance exceeded the value of my house, the loan would automatically be paid and I would receive the overage. Is there any truth to that?
Answer from Brian Cooper:
Thanks for your question! The loan is never "automatically" paid back. Your reverse mortgage continues for as long as you live in your home, as long as you continue meeting your loan obligations; such as paying your property taxes, homeowners insurance and keeping your home in good repair, etc. When you no longer live in your home or you pass away, the loan becomes due. You/your heirs have up to a year (6 months + 2 3-month extensions can be granted) to repay the loan by either selling the home or taking our their own loan to pay the balance due. Any remaining equity belongs to you/your heirs We love questions! Keep them coming!
Fred S. (Wisconsin)
Question: Hi Brian: I already have a mortgage on my home. Can I still qualify for a Reverse Mortgage?
Answer from Brian Cooper: Thanks for your question Fred. Yes… You can still qualify. You can use the Reverse Mortgage to pay off the balance of your current mortgage or equity loan. By doing so, you will "free up" the money you used to use for monthly payments on your old loan.
Question: Do I still own my home if I do a reverse mortgage?
Answer from Brian Cooper: Good question Ken. This is perhaps the biggest misunderstanding relating to Reverse Mortgages. A Reverse Mortgage is only a lien on your home… exactly like a "forward" mortgage. You still own your home. When you leave your home, the loan balance is repaid in full with the remaining equity passing to you or your heirs… exactly like a "forward" mortgage.
Question: Sorry Brian… Ken again with one more question. I understand now that I still will own my home… but won’t I use up all of the equity in my home? Will there be anything left for my heirs?
Answer from Brian Cooper: Please Ken… no apologies. This forum was created so you can freely ask any questions you want. I want everybody to truly understand everything about a Reverse Mortgage.
There are many factors that will determine whether there will be any equity left for your heirs. Some of these factors are in your control (i.e. how much money you draw from the reverse mortgage) and some are not in your control (i.e. whether your home appreciates in value). There is definitely the possibility that at the time the reverse mortgage comes due, the principal, interest and associated costs have used up all the equity in your home. There are also other possibilities, such as additional equity created by your homes' appreciation. All these options should be discussed with family members and your trusted advisors.
Question: Wouldn’t it be better to just sell the home?
Answer from Brian Cooper: If you sell your home, you lose one of the largest and most secure investments you probably have. You would lose 5%-8% of your home's equity in sales costs alone. After selling, you would most likely have to pay rent or some other type of monthly payment that would eat away at your savings. In addition, moving from a home is physically and emotionally difficult. A Reverse Mortgage is a much better option for many.
Tim P. (North Brunswick, NJ)
Question: My house needs some repairs done on it. Will that stop me from getting a reverse mortgage?
Answer from Brian Cooper: If the repair estimate exceeds 15% of the maximum claim (appraised value or county lending limit‚ whichever is lower), then the borrower will have to pay the repair fees in excess. A repair set-aside can only be for 15% or lower than the max claim.
Question: Why wouldn’t I just get a home equity loan?
Answer from Brian Cooper: With a traditional second mortgage, or a home equity line of credit, you must have sufficient income to qualify for the loan, and you are required to make monthly mortgage payments. A reverse mortgage works very differently. The Reverse Mortgage lender pays you. You don't make monthly mortgage payments and can not be foreclosed or forced to vacate your home because you "missed your mortgage payment."
Margaret B. (Schenectady, NY)
Question: I’m planning on living a very long time. Can the lender take my home away if I outlive the loan?
Answer from Brian Cooper: No! The reverse mortgage loan does not become due until your home is sold, is no longer your primary residence or until the last borrower dies. Assuming you continue to pay your property taxes, insurance and maintain your home, you cannot be forced to sell your home to pay off the mortgage loan even if the loan balance grows to exceed the value of the property. HUD's Federal Housing Administration guarantees that you'll receive all the payments that are owed to you.
Jim H. (Oakdale, CT)
Question: Hi Brian. What if I own a condominium, not a single-family home?
Answer from Brian Cooper: You can still qualify for HUD's reverse mortgage program if the condominium is FHA approved. Please use the form to the right to contact me for more information about getting FHA approval for your condo.
Question: I entered into the Florida Housing Finance Corporation Home Investment Partnership program back in 2000 when I bought my home. I have the first 30 year mortgage for $57,900 and the subordinate mortgage for $15,000. The Note on the subordinate mortgage provides that payment shall be deferred until the first to occur of the following events: (a) Borrower sells, transfers or disposes of the Property or Home either voluntarily or involuntarily; (b) the Borrower fails or ceases to occupy the Home as a principal residence and (c) the Borrower, or if the Borrower is married, the survivor of the Borrower or the Borrower’s spouse dies. The $15,000 is showing up as a lien against my home. Can I still do a reverse mortgage or would I have to pay off this $15,000 plus any interest off first in order to do a reverse mortgage? Is there another alternative? Thank you for your help.
Any liens or judgments that are attached to the house would be required to be paid off. You can use the proceeds from the reverse mortgage to pay this off (it wouldn't have to be paid off by you prior to doing the reverse).
Question: Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Answer from Brian Cooper: Yes. While your property must meet FHA minimum standards, it doesn't matter if you didn't buy it with an FHA insured mortgage. Your new HUD reverse mortgage will be a new FHA insured mortgage loan.
Michael L. (New York, NY)
Question: How do I know if I qualify for a reverse mortgage?
Answer from Brian Cooper: There are numerous requirements to qualify for a reverse mortgage including age, equity, counseling, income and credit. The best way to determine whether you may qualify for a reverse mortgage is to speak with a reverse mortgage specialist. I don't like to self-promote on this site but you can always call the toll-free number above to reach me.
Michael L. (New York, NY)
Question: How long have reverse mortgages been around?
Answer from Brian Cooper: The Reverse Mortgage became a valuable and safe tool for senior Americans when the United States Congress authorized the Department of Housing and Urban Development (HUD) through the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) in 1987.
Francis C. (Lexington, MA)
Question: I’m trying to describe to my son what a reverse mortgage is. Can you provide me with a brief description?
Answer from Brian Cooper: First, it is a great idea to consult with your son or any other trusted advisor.
A Reverse Mortgage is a special type of home loan that lets a homeowner convert a portion of their equity in his/her home into cash. A portion of the equity built up over years of home mortgage payments can be paid to the homeowner in a lump sum, in a stream of payments, or made available in a line of credit. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrowers no longer use the home as their principal residence. This assumes the homeowner continues to pay their property taxes, insurance and maintain the home.
Question: What are the minimum and maximum amounts that I can borrow?
Answer from Brian Cooper: The maximum amount you can borrow is based on a HUD formula that factors in the age of the youngest borrower, the expected interest rate, and the "plan-adjusted value" for the local county. The plan adjusted value, or "maximum claim amount" is the lesser of the appraised value of your home or the plan adjusted value for a one-family residence that can be insured by FHA in your area. There is no minimum borrowing amount.
Linda C. (Houston, TX)
Question: How do I calculate the amount of the monthly payment I will receive?
Answer from Brian Cooper: How much you receive in monthly payments depends on the age of the youngest borrower, the current interest rate, the plan adjusted value, and the length of time that you will be receiving payments (for a fixed period of time or for as long as you live in your home). The older you are, the more benefit you qualify for, the larger your payments are likely to be. This is not a calculation you are able to perform. Your reverse mortgage specialist will present you with a printout which calculates your payment.
Question: Will my heirs owe anything to the mortgage lender if I die?
Answer from Brian Cooper: Upon your death, the loan balance, consisting of payments made to you or on your behalf plus accrued interest and fees, becomes due and payable. Your heirs may repay the loan by selling the home or by paying off (refinancing) the HECM loan so that they may keep the home (identical to a "forward" mortgage). If the loan exceeds the value of your property, your heirs will owe no more than the value of the property. FHA insurance will cover any balance due the lender. No additional financial claims may be made against your heirs or estate.
Question: If my home appreciates in value during the mortgage term, am I entitled to that money?
Answer from Brian Cooper: Under the HECM Reverse Mortgage, you are only legally required to pay back to the lender the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs. So if your home appreciates in value, you benefit.
Winston T. (Mountain View, CA)
Question: What if I decide to sell my home?
Answer from Brian Cooper: No problem. If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender. You, or your estate, will receive any proceeds exceeding the loan balance.
Elizabeth P. (Orangeburg, SC)
Question: Is this a fixed rate loan?
Answer from Brian Cooper: Fixed and adjustable rates are offered.
Question: I’m concerned that the payments will affect my Social Security, Medicare, Supplemental Security Income or Medicaid benefits.
Answer from Brian Cooper: HECM Reverse Mortgage advances can be added to your liquid assets under some programs. Proceeds should not affect Social Security, Medicare or pension benefits. I suggest you consult the local offices for these programs or any other to determine how HECM Reverse Mortgage payments may affect your particular situation.
Question: Can I get a reverse mortgage on my vacation home?
Answer from Brian Cooper: Generally vacation homes or other secondary residences, mobile/manufactured homes that are not attached to a permanent foundation, rental properties of more than four units and homes on leased lands do not qualify.
Question: My home is in a “living trust.” Does this matter?
Answer from Brian Cooper: A homeowner who has put the home in a living trust can usually take out a Reverse Mortgage. The trust documents would need to be reviewed by the lender.
Question: Do I have to pay taxes on the reverse mortgage proceeds?
Answer from Brian Cooper: Currently, the Internal Revenue Services treats monies received from a Reverse Mortgage to be loan advances and not taxable income. For your specific situation, I recommend that you consult your tax advisor.
Grant V. (Salt Lake City, UT)
Question: Can I deduct the interest charged on my loan principal for tax purposes?
Answer from Brian Cooper: The interest accrues and is deductible when the loan balance and interest is repaid or when the borrower permanently leaves the property. For your specific situation, I recommend that you consult your tax advisor.
Question: What if I owe more than my home is worth?
Answer from Brian Cooper: All FHA insured HECM reverse mortgages are "non-recourse" loans, which means that you can never be responsible for more then the value of the home… regardless of the loan balance.
Beverly C. (Washington, DC)
Question: Who pays my property taxes and insurance?
Answer from Brian Cooper: You are required to pay your property taxes and keep current property insurance in place.
Question: Do I, or my heirs, have to sell the property to repay the loan?
Answer from Brian Cooper: No. Repayment can be accomplished by a refinancing of the existing reverse mortgage by a conventional mortgage loan or any other means of paying it off.
Morton K. (Cleveland, OH)
Question: Brian… how do I contact you to review at my specific situation?
Answer from Brian Cooper: As moderator of this forum, my first priority is to provide honest, unbiased answers to your questions. If you would like me to contact you to discuss your particular scenario, I can be reached toll-free at 1-800-486-8786 or you can use the Contact Form to the right. I will be happy to assist you in any way.
Rosa B. (Portland, OR)
Question: How do I receive my money?
Answer from Brian Cooper: You have four options: 1. Lump Sum, 2. Monthly Payments (your choice of loan advances for a specific period, or for as long as you live in your home), 3. Line of Credit (unscheduled payments or in installments, at times and in amounts of your choosing until the line of credit is exhausted), 4. Any combination of the three above.
Question: What would be my out of pocket costs?
Answer from Brian Cooper: Typically there is only one, the appraisal which should cost between $450-$550 depending on the property type and the area you live.
Question: How long will the process take?
Answer from Brian Cooper: You should be able to close on your reverse mortgage within approximately 4-6 weeks of receiving your counseling certificate.
Question: Can I make payments if I want?
Answer from Brian Cooper: Yes. You may make payments if you want however payments are not required. There is no prepayment penalties.
Min Y. (Rochester, NY)
Question: What is the interest rate charged?
Answer from Brian Cooper: There are fixed and variable rates available. Variable rates are typically tied to the U.S. Treasury Bonds with a low margin. Feel free to contact me at 1-800-486-8786 for todays rates.
Question: Are there any restrictions on what I can use with the proceeds of a Reverse Mortgage?
Answer from Brian Cooper: None whatsoever (as long as it's legal). You can use the proceeds any way you choose. After all, it's your money.
Rob C. (Scottsdale, AZ)
Question: Who really owns my home?
Answer from Brian Cooper: You do. A reverse mortgage is a lien, just like a traditional mortgage.
Question: Who should I look to for advice?
Answer from Brian Cooper: Decide who you trust, and then discuss your intentions with them. It may be your attorney, a financial advisor, AARP, a family member or close friend. You should feel confident in your decision.
Ritu K. (Atlanta, GA)
Question: I have sufficient cash to meet my daily living expenses but my financial advisor suggested I look into a reverse mortgage for estate planning. I thought reverse mortgages were more for “cash-poor” seniors?
Answer from Brian Cooper: Even though some seniors may have a greater need than others for the cash or monthly income, a reverse mortgage can also be an excellent financial or estate planning tool to enhance the quality of life and/or to better manage your assets.
Question: What are the biggest advantages of a reverse mortgage?
Answer from Brian Cooper: There are many… but here are a few of the most significant:
1. Stay in your home and remain Independent. A reverse mortgage can allow you to remain in your home and retain homeownership.
2. No monthly mortgage payments. You need not pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home. This assumes you have paid your property taxes, insurance and maintained your home.
3. Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax-free and should not affect your Social Security or Medicare benefits (consult your tax advisor).
4. Freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.
Matt B. (Baltimore, MD)
Question: What is “TALC” and why should I know about it?
Answer from Brian Cooper: TALC is short for "Total Annual Loan Cost." It combines all of the costs of a reverse mortgage into a single annual average rate and can be very useful when comparing one type of reverse mortgage to another. If you are considering a reverse mortgage, be sure to ask the reverse mortgage Specialist to explain the TALC rates for the various reverse mortgage products.
Question: I understand that I must meet with an unbiased counselor before completing my reverse mortgage application. What does that accomplish?
Answer from Brian Cooper: This is a federally mandated feature of the reverse mortgage process and is designed for your protection. The counselor, who is from an independent government-approved housing counseling agency, explains in detail the pro's and con's of all your Reverse Mortgage alternatives. He or she will discuss a reverse mortgage's costs and financial implications, should tell you about any government or nonprofit programs for which you may qualify.