Reverse Mortgages

Questions and Answers

Provided by your Reverse Mortgage Specialists

What is a reverse mortgage and why would a homeowner consider doing one?

A Reverse Mortgage is a special home loan program designed especially for homeowners who are at least 62 years old that allows them to convert the equity in their home into non-taxable income, without having the burden of making monthly loan payments. The homeowner receives money from the equity in their home and they do not make any kind of a loan payment as long as they are living in their home! There are many reasons a homeowner might consider doing a Reverse Mortgage. Here are just a few of the ways our clients have used the money they receive from this program -

• Receive additional non-taxable income
• Pay off an existing mortgage to eliminate house payments
• Pay off credit card debt or medical bills
• Pay for in home or assisted living care
• Purchase a primary residence or investment property
• Help their children buy a home
• Help pay for college for grandchildren
• Maintain an independent life-style free from financial worry
• Update or make home repairs to maintain value of home
• Have money to travel

Q: Who is eligible for a Reverse Mortgage?

A: Any homeowner who is at least 62 years old, who owns their home either free and clear or with substantial equity position.

Q: Are there any other special requirements?

A: Yes. You must agree to accept mortgage counseling from an approved Reverse Mortgage Counselor. This service is provided to assist you in understanding this program, so you can be confident about whether this program is right for you. Family, friends and trusted advisors are encouraged to attend the counseling session with you.

Q: How does this differ from a home equity loan?

A: With a home equity loan you must be able to show that you have the monthly income to qualify for the loan and may be required to requalify each year. You must also begin to make regular monthly payments to repay the loan as soon as it is taken out. With a Reverse Mortgage, there are no monthly income requirements and you do not make monthly payments...ever!

Q: How is the interest on the loan handled since I don't have to make any monthly payments?

A: Interest is computed and added on to the balance owed each month. Therefore, the loan balance increases each month.

Q: How much money can I get?

A: The amount that can be borrowed is based on a formula that factors in the age of the youngest borrower, the expected interest rate, the anticipated rate of appreciation for your home and the current market value of the home.

Q: Do I have to pay off my current home loan?

A: Any existing liens on the property do need to be paid off. This is usually done with the first of the reverse mortgage monies at the closing of the transaction. (This will eliminate the need to make any loan payment on any loans).

Q: How can I receive the money?

A: You may choose from five payment plans:

     TERM: You receive equal monthly payments for a fixed period of time.

     TENURE: You receive equal monthly payments for as long as you occupy your home as your primary residence.

     LINE OF CREDIT: You may draw monies when you choose.

     MODIFIED TENURE/TERM: You may set aside a portion of your loan proceeds as a line of credit and receive the remainder in the form of monthly payments.

     LUMP SUM: Of course you can take all you are eligible for in one lump sum at closing.

Q: Will these payments to me affect my Social Security or Medicare Benefits?

A: NO! Money received will not affect eligibility for retirement, survivor disability or Medicare benefits payable under the Social Security Act. However, eligibility for need-based programs such as Supplemental Security Income (SSI) could be affected if loan proceeds are accumulated in a checking or savings account.

Call us at: (503) 710-8729 or visit us: http://www.sterlinghomemortgages.com/foresbeaudry