Frequently Asked Questions about Reverse Mortgages
The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program, which enables you to withdraw some of the equity in your home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading their free booklet, "Use Your Home to Stay at Home," a guide for older homeowners who need help now. I can send you this guide by mail or email should you like to read it. It is smart to know more about reverse mortgages, and decide if one is right for you!
1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
2. Can I qualify for FHA's HECM reverse mortgage?
To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, have the financial resources to pay ongoing property charges including taxes and insurance, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan. You can find a HECM counselor online or by phoning (800) 569-4287.
3. Can I apply for a HECM even if I did not buy my present house with FHA mortgage insurance?
Yes. You may apply for a HECM regardless of whether or not you purchased your home with an FHA-insured mortgage.
4. What types of homes are eligible?
To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible. If your condominium is not HUD approved we can work with your association to get it approved.
5. What are the differences between a reverse mortgage and a home equity loan?
With a second mortgage, or a home equity line of credit, borrowers must make monthly payments on the principal and interest. A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments. With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.
6. Will we have an estate that we can leave to heirs?
When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid. All proceeds beyond the amount owed belong to your spouse or estate. This means any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.
7. How much money can I get from my home?
The amount varies by borrower and depends on:
- Age of the youngest borrower or non-borrowing spouse
- Current interest rate
- Lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price; and
- Initial Mortgage Insurance Premium
If there is more than one borrower, the age of the youngest borrower is used to determine the amount you can borrow.
8. How do I receive my payments?
For adjustable interest rate mortgages, you can select one of the following payment plans:
- Tenure- equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term- equal monthly payments for a fixed period of months selected.
- Line of Credit- unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
- Modified Tenure- combination of line of credit and scheduled monthly payments for as long as you remain in the home.
- Modified Term- combination of line of credit plus monthly payments for a fixed period of months selected by the borrower. For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
- Single Disbursement Lump Sum - a single lump sum disbursement at mortgage closing.
9. What if I change my mind and no longer want the loan after I go to closing? How do I do this?
By law, you have three calendar days to change your mind and cancel the loan. This is called a three day right of rescission. The process of canceling the loan should be explained at loan closing. Be sure to ask the lender for instructions on this process. Mortgage lenders differ in the process of canceling a loan. You should ask for the names of the appropriate people, phone numbers, fax numbers, addresses, or written instructions on whatever process the company has in place. In most cases, the right of rescission will not be applicable to HECM for purchase transactions.
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Very professional but still easy to work with
Very professional, on point, kept me in the loop on what was next. I’m very happy with how things came together!!! On a scale of 1 to 10, I give him a 10. Have already told a friend about him.
When we thought about reverse mortgages, we were concerned that is was a scam. We did tons of research and realized that actually, it was not. As soon as we did our research, we then started looking for someone to help us. Monty's name was referred to us by a trusted banker. He did not disappoint. He was very patient, explaining everything (sometimes more than 3 times:) and making sure we really did understand everything. We waited, I believe, several months, before really getting down to business. Again, during that time, Monty emailed, but NEVER pressured us in any way. He sat down with us and went through the final papers, alleviating any of our fears. We signed the papers and trust me, we are very happy. We're now putting the money we were putting in our mortgage in a savings account and we are disappointed in the least with what we've done. This is not an easy decision to make, but if you do, please call Monty.
Bests thing financially I have done for myself in yearfs
Getting a Reverse Mortgage with Monty Simmons was the best thing I have done for myself financially in years. No longer having to pay a monthly mortgage, and the money I got out of the equity in my home has allowed me to pay off or down most of my credit cards, thus meaning I have more cash flow each month, and even my credit scores have dramatically improved, and are continuing to improve, as my increased cash flow allows me to pay down more of my credit cards, continually increasing my My Fico score. It is a vicious cycle in the right direction that I now can continue month after month. Also, I look forward to another chunk of money coming in a year which will allow me to do a lot more things I want to do = fix up my house, travel. At this time, this is the best move I have made in a long time, and I can relax now since I no longer have to be desperate to make it to the next time I get money in.
After my husband and I decided we needed to do a reverse mortgage, I contacted several lenders to compare services. Monty Simons was the only one that followed up with us during our selection process of who we wanted to work with. The process was a long tedious one because of our circumstances, but Monty hung-in there and was very patient. He kept us informed on each step of the process from the beginning until the loan closed. I was able to obtain the needed documents, scan them, and do everything through email until the final signing. All my phone calls and emails were returned or replied to promptly. We finally closed our reverse mortgage the end of October 2015. I have no regrets choosing to work with Monty Simons and I would highly recommend him to anyone contemplating a reverse mortgage.
Persistence pays off - 4 stars
Monty had been working with me for the past two years hoping that I would see the benefit of a referse mortgage. Even though I was indecisive for soon long, Monty hung in there while occasionally providing me with updated data on the changes taking place with the reverse mortgage programs. When I fianlly decided in favor of the reverse mortgage, Monty took the time to answer any additional questions I raised as we proceeded through the process. Occasionally his answers didn't get to the heart of my concerns so Monty would get back to me with further data to satisfy my concerns about the possible negative aspects of a reverse mortgage. Although I'm sure my insistence for clearer answers on how final figures were calculated might have irritated Monty at times, he was always professional in his reponses and promised to get back to me with better explanations as to how the calculations were determined - which he did. Overall, I would recommend Monty to past clients of mine should they be considering a reverse mortgage.
Most Positive Experience
I recently closed escrow on a reverse mortgage, which was an extremely positive experience. My loan agent, Monty Simons was helpful, caring, and forthright in making this a simple and smooth transaction. He was professional and knowledgeable and was always available. I would highly recommend Monty without any reservation whatsoever. It was a pleasure to know that I never needed to be concerned about my loan and its process. Thank you Monty for making this such a easy and worry free process.
Efficient, Cordial, Great guy
I was referred to Monty by my local bank. After I spoke to him the first time I felt as if the weight had been lifted from my back. Monty explained the Reverse Mortgage, and the process. I think all in all it took just over a month to complete. Now I have some cash, no mortgage payments, and someone I can call with questions. I couldn't recommend him highly enough. Your losing out if don't call him!!
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Senior Funding Reverse Mortgages - Monty Simons
23801 Calabasas Rd Suite 2018
Calabasas, CA 91302
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