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
203-776-4400
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:
- 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
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
Davis O'Sullivan & Priest LLC
203-776-4400
Fax: 203-774-1060
davis@sharinglaw.net
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
- CHFA (for CHFA mortgages) 860-571-3502