Ten Reverse Mortgage Basics
(updated 10-15-09)
Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
129 Church Street, Suite 805
New Haven, CT 06510
Fax:  203-774-1060



1.      Do I have to pay anything monthly?  No.

2.      When does the mortgage get paid back?

          A reverse mortgage is payable when the property is no longer the “home” for any of the borrowers -- usually because of death, moving, or selling the property -- including if you move to a nursing home

3.      Does the company "take the house"?  NO -- if the debt is less than the sales proceeds of the house

4.      Can the company sue my heirs if the house is worth less?  NO -- the company only gets repaid out of the value of the house.

5.      Am I Eligible?

          - No Income Requirements.

          - Borrower(s) must be 62 or older.  For CHFA:  70 or older/income limits

6.      Is it Worth it?  High Closing Costs -- starts with 2% origination fee on first $200,000 borrowed; 2% mortgage insurance premium, etc. -- 4,000- $15,000 (except CHFA.)

7.      What About Interest?  5.56% fixed (10/09) or about 3% (variable, likely up to 6%) accrues as follows:

          - On financed Closing Costs -- from date of closing

          - On amounts you take -- from date you take them

8.      How much can I get?

          - Depends on age, location, and value of your house

          - Depends on other debt:  ALL LIENS must be paid before closing

          - Federal loans:  can't borrow against more than $625,500* in equity

          - Jumbo loans:  More is available.                                   *2009 - less in 2010

EXAMPLE:  75-year-old widower in North Haven with home worth $300,000, federal loans would give $104,888 to $172,417.

9.      How can I take the money? Any one or more of:

          -  Lump sum

          -  Line of credit (with/without annual increase!)

          -  Annuity (only option for CHFA except for modest lump sum)

10.    What about Title XIX?

          - Lump sums borrowed count as assets; but amounts you take out are not "income" and you cannot be forced to borrow.

The Good and Bad of Reverse Mortgages*
Lisa Nachmias Davis                                     * (updated 10-15-09)
Davis O'Sullivan & Priest LLC
129 Church Street, Suite 805
New Haven, CT 06510

Fax:  203-774-1060


1.      Do You Need To?  Alternatives:

          -  Connecticut Home Care Program for Elders (no interest on state lien)

          -  Home Equity Loan for $100,000 (interest-only payments) (if you can)


2.      When Not to Do a Reverse Mortgage:

          -  When the money really won't be enough for your needs

          -  When you don't plan to stay

          -  When one spouse would move if the other passed away

          -  When someone else lives there and is under 62

              For example:  disabled child -- or younger spouse or relative not included as a borrower

          -  When you have significant other debt -- including state liens


3.      Special Times to Consider a Reverse Mortgage:

          -  When you want to stay home no matter what

          -  When home repairs or high property taxes may cause you

             to lose your home AND you can really "catch up" by borrowing

          -  When it's doubtful state aid will suffice for your needs

          -  To get the mortgage locked in BEFORE applying for state aid


4.      If You Do a Reverse Mortgage:

          -  Check your will:  did you leave the house to someone specially?
          -  Remember:  making a GIFT of proceeds will likely affect

             future Medicaid eligibility; taking out a lump sum causes problems

          -  Use an experienced reverse mortgage professional

              who asks you about all the questions in this handout


5.      Where To Find Out More:

          -  AARP website - www.aarp.org/revmort

          -  www.reverse.org

          -  Consumers Union:  www.consumersunion.org

          -  CHFA (for CHFA mortgages) 860-571-3502