Frequently Asked Questions

By Percy Ihara
Wednesday - April 15, 2009
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What is a reverse mortgage?

A reverse mortgage is a loan that enables senior homeowners, age 62 and older, to convert part of their home equity into tax-free* income-without having to sell their home, give up title to it, or make monthly mortgage payments. The loan becomes due when the last borrower (s) permanently leaves the home.

* Consult Financial Advisor. Not all products available in all states.

How is a reverse mortgage like a home equity loan? How is it different?

Both a reverse mortgage and a home equity loan use the equity you have built up in your home to provide you with readily available cash.

They differ in that with a home equity loan you must make regular monthly payments of principal and interest. However, with a reverse mortgage you do not make any required monthly mortgage payments for as long as you stay in the home.

Can my current income influence my ability to get a reverse mortgage?

No. Since reverse mortgage borrowers need not make monthly repayments, there are no income qualifications.

What are the advantages of a reverse mortgage?

There are many. Here are a few of the most significant:

* Remain independent. A reverse mortgage allows you to remain in your home and retain home ownership.
* Stay in your home. It allows you to remain in your home and retain home ownership.
* No monthly mortgage payments required. You need not pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home.
* Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free* and will not affect your Social Security or Medicare benefits.
* Freedom and flexibility. The money you get from a reverse mortgage is yours to use in any way you choose.
* Consult Tax Advisor

I’ve heard that with a reverse mortgage the lender would own my home. Is this true?

It’s absolutely false. The borrower retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower.

Because the homeowners retain title, they remain responsible for the payment of property taxes, hazard insurance, and maintaining the home in reasonable condition - just as they would with a standard first mortgage or home equity loan.

Can I refinance a reverse mortgage, as I would be able to do with a traditional home mortgage?

Yes. Refinancing can make sense if your home either increases in value, the interest rates drops or the maximum lending limit increases. Keep in mind that when deciding to refinance a reverse mortgage, it is important to compare the amount of benefit versus the cost of the loan before making this decision. The amount of benefit received should be twice the amount of the cost to refinance the loan.

Can a reverse mortgage lender take my home away if I outlive the loan?

No they cannot. And the loan is not due at that time either. In fact, you don’t need to repay the loan as long as you or another borrower continues to live in the house as the primary residence and keep the taxes paid and hazard insurance in force.

Who can qualify for a reverse mortgage?

Seniors 62 years of age or older may qualify. There are virtually no income or credit qualifications.

At Financial Freedom, we’re proud of our reputation for integrity and we adhere to the highest ethical standards in dealing with seniors and their advisors.

As pioneers of the industry, we’re a founding member of NRMLA, the National Reverse Mortgage Lenders Association, and we subscribe to the NRMLA Code of Conduct and Best Practices Standards created to protect seniors from predatory lending practices associated with reverse mortgages.

Here’s what we’re doing to ensure that you get objective, complete and honest information about reverse mortgages when you do business with Financial Freedom.

* Documenting your options.

Our Reverse Mortgage Specialists provide each senior borrower with a document, created by Financial Freedom’s innovative, proprietary software program, that clearly illustrates all products and benefit options available to that senior.

* Involving your advisors.

We encourage all of the senior borrower’s advisors, both personal and professional, to meet with our Reverse Mortgage Specialists to review the needs and options available to that senior.

* Unmatched training.

Our Reverse Mortgage Specialists receive the most comprehensive training in the industry, including training on how to protect the interests of our senior customers and prospective customers.

 

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