Reverse Mortgages for Utah
Reverse mortgages are one of our newest offerings here at USF. Let’s talk about what a reverse mortgage is, and the qualifications for taking out a reverse mortgage.
The major qualifying factor is that you need to be at least 62 years of age. However, if you are married and your spouse is not yet 62 you can still receive a reverse mortgage. Your spouse, however, will need to be listed as”non-borrowing. But, before you take on a reverse mortgage with a non-borrowing spouse you should know the risks.
- You will qualify for less money.
- Your spouse will be able to remain in the home if you happen to pass away while the loan is still active ( however, headlines in recent years have called out the program for kicking non-borrower spouses out of their homes when the borrower has passed away)
As recently as 2014, the Department of Housing and Urban Development has taken steps to curtail the issue of the non-borrower spouses being removed from their homes. These steps allow non-borrower spouses to remain in the home as long as they:
- Have been Qualified
- Were Married at the time of Application
- Were Married at the time of Death
- Keep up with the loan Obligations
In 2015 the guidelines were updated and clarification provided for a qualifying non-borrower spouse and then in 2017 changes were made again to enable the non-borrower spouses to remain on the title. This allows for easier access to prove their right to stay in the home when a spouse has passed. Even with all these additional protections, there are still some instances in which non-borrower spouses are not protected.
- If the borrower moves to a nursing home or care facility for more than 12 months the loan will become due and payable.
If there is any inclination that the borrower may need in-home or alternate housing care, please consider these possible pitfalls before choosing a reverse mortgage.
Who can Benefit from a Reverse Mortgage?
Reverse mortgages can come in handy in estate and retirement planning, but are often used a last-resort source of income. A reverse mortgage works by paying out the equity of the home to the borrower on a monthly basis. In this way, it acts as an additional income source. The loan is repaid in full either when the borrower moves out or passes away.
The majority of Reverse Mortgages are Home Equity Conversion Mortgages and are insured by FHA. This allows anyone over 62 to tap into their home equity without moving. A HECM can also be used to buy a home. However, the majority of HECM loans are used for those borrowers who don’t plan on moving, can’t afford the maintenance, insurance, or property taxes. It is also used to give access to the equity on their home. This is often used for supplemental retirement income or to pay off the mortgage and have additional monthly cash flow.
How does it work?
- Your lender makes payments to you, based on a percentage of home equity accumulated over the time you’ve owned the home.
- The loan will be repaid when the borrower dies, sells the home, moves out or is in a permanent care facility for more than 12 months.
- Seniors, age 62 and older who have small mortgages that can be paid at closing or who own the home outright are eligible for these loans.
- Lenders will need to evaluate your credit, income, assets, and even monthly living expenses. You must be up to date on property taxes and all insurance premiums.
- In order for your home to qualify for a reverse mortgage, it must meet all FHA property standards and flood requirements.
- The money received through a Reverse Mortgage can be used for whatever you feel is necessary.
A few things will determine how much you will receive from doing a reverse mortgage including:
- Age (age of younger spouse)
- Value of your home
- Current Interest rates
- Lesser of appraised value, or the HECM FHA mortgage limit of $679,650.
Generally the older you are, and the more your home is worth, the more you will receive from a reverse mortgage. Seniors with an ARM loan are eligible for a lump sum collection, fixed monthly payment, or line of credit. Fixed rate mortgage holders receive a lump sum.