A Reverse Mortgage is a line-of-credit which converts the equity in a primary residence into cash without monthly payment obligations as the loan isn’t repaid until the homeowner dies, sells or moves.
It can assist in the financing of retirement, long-term care, home improvements – or even be used to pay off an existing mortgage.
Thinking In ‘Reverse’
Perhaps the easiest way to understand a Reverse Mortgage is to compare it to a regular (or ‘traditional’) mortgage:
Reverse Mortgage |
Regular Mortgage |
|
Loan Balance |
Grows over time |
Decreases over time |
Loan Paid Off |
Upon death, selling or moving |
Certain date in the future |
Equity |
Reduces over time |
Increases over time |
Payments |
Credit Union pays YOU |
YOU pay the Credit Union |
Eligibility Requirements for Reverse Mortgages
Because the homeowner isn’t going to be making any payments there are no income or credit score requirements for a Reverse Mortgage – but they do need to meet ALL of the following conditions:
- Be a homeowner who is 62 years of age or older
- The home must be your primary residence
- The home must be in good repair
- The Reverse Mortgage must be the only loan on your home (You can use a Reverse Mortgage loan advance to pay off the current mortgage)
- The home must not have any legal judgments or tax liens against it
- The homeowner must have not any outstanding federal student loans that are in default
Reverse Mortgage Rates
This is a variable-rate product which is based on the LIBOR (London Interbank Offered Rate – the rate at which banks borrow from other banks on the London wholesale market) plus a margin of 3.00% or 4.00% based on the rate adjustment option chosen by the homeowner:
Adjusts Monthly |
Adjusts Yearly |
|
Rate = LIBOR + |
3.00% |
4.00% |
Annual Cap |
Not Applicable |
2% Annual Increase |
Lifetime Cap |
10% Above Starting Rate |
5% Above Starting Rate |
Reverse Mortgage Fees
The fees associated with a Reverse Mortgage are not paid up-front by the homeowner. They are paid with an advance on the Reverse Mortgage’s line-of-credit. Thus means there is no “out of pocket” expense involved with getting a Reverse Mortgage.
Most of the fees are based on the amount of the Reverse Mortgage’s approved line-of-credit – which can be up to $530,000 depending on the value, equity and location of the home as well as the age of the homeowner.
- One-time: 2% of the total approved line-of-credit paid to the FHA (Federal Housing Authority)
- One-time: Between $2,500 and $6,000 in origination fees (depending on the total approved line-of-credit)
- One-time: Standard closing costs of approximately $2,000
- One-time: Third-party educational counseling fee of up to $125
- Ongoing: Annual mortgage insurance premium of 0.5% of any outstanding balance
- Ongoing: $30 monthly service fee
To Apply or Learn More
Our friendly and knowledgeable Real Estate Representatives can answer questions and assist you with Reverse Mortgages. They’re available Monday through Friday from 8:30AM to 5:00PM and Saturday from 8:30AM to 3:00PM and can be reached:
- In person at our California Street Branch
- By phone at 888.499.FIRE (3473)