A leader in innovative services for older adults, WISE & Healthy Aging, a nonprofit headquartered in Santa Monica; in association with the National Council on Aging; now offers counseling to those considering reverse mortgages on their homes. A reverse mortgage is a home loan that allows homeowners aged 62 or higher to draw cash from the equity in their home, providing a source of income.
Completing the counseling services offered by WISE & Healthy Aging helps homeowners qualify for a federally-insured Home Equity Conversion Mortgage (HECM) in addition to providing valuable information for an important decision.
Costs. Upfront costs can be high and include:
1. Lender’s origination fee ($2,500 to $6,000);
2. Mortgage insurance (2% of the maximum claim amount);
3. Closing costs (appraisal fee, attorney’s fee, etc.).
The longer a reverse mortgage is kept, the lower the annual cost as these upfront costs get spread over time.
Ongoing costs include a monthly servicing fee ($30 to $35) and monthly mortgage insurance (0.50 percent per year on the loan balance), both added to the loan balance monthly. The loan is repaid when the home is sold or the homeowner passes away. The loan amount is based on the value of the home, ones age and expected interest rates.
Loan Structure: the loan can be paid out in several ways including lump sum; monthly payments; credit line; or a combination of these. Each has pros and cons, which can be discussed with a counselor. The loan balance is deducted from the equity in your home, so you may have little or no equity left when you decide to move or when you pass away.
Responsibilities during the loan. (1) Live in your home for at least six months out of the year; (2) keep property taxes and insurance current; (3) maintain the property; (4) do not change the deed; and (5) do not take out new debt on the home. Failure to comply will lead to the loan becoming due.
Eligibility for public benefits. Reverse mortgage proceeds can affect eligibility for some public benefits programs, such as SSI and Medicaid. Social Security and Medicare are not affected by a reverse mortgage.
These are some of the considerations of a reverse mortgage. To learn more, visit www.wiseandhealthyaging.org/revmortgage/. For more information or to schedule a counseling session with a reverse mortgage counselor call (310) 394-9871 ext. 435.
