Ten Reverse Mortgage Basics (updated
Lisa
Nachmias Davis
Attorney at Law
205 Church Street - Third Floor
New Haven, CT 06510
203-776-4400
Fax:
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 all borrowers -- usually
because of death, moving, or selling the property -- includes moving 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 -- $3,000 to $15,000
except CHFA.
7. What About Interest? 5.86%-7.75% interest (variable) 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 $417,000 in
equity
- Jumbo loans: More is available.
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?
- NEW LAW -- no Title XIX if you have
home equity over $750,000
- Reverse Mortgage payments are not
"income" - you can't be forced to borrow
The Good
and Bad of Reverse Mortgages*
Lisa
Nachmias Davis * (updated
Attorney at Law
203-776-4400
Fax:
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 or less (interest-only payments)
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 not
included as a borrower
-
When you have significant other debt -- including state lien
3. Special Times to Consider a Reverse Mortgage:
-
When you want to stay home no matter what
-
When it's doubtful state aid will suffice for your needs
- When you want to
keep your cash but still want to give something to the kids -- new 5-year
Look-Back Period
-
To cover expenses if you've made a gift and might need care
-
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
-
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