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Reverse Mortgage FAQ

Frequently Asked Questions:


How does a reverse mortgage affect Social Security, Medicare or pension benefits?


Reverse mortgages generally do not affect these benefits; however programs do vary state by state so you should consult your financial advisor for detailed information.


Is it required that I receive counseling before getting a reverse mortgage?


Yes, Counseling from a HUD approved counselor is required. The counseling is designed to protect you while determining if a reverse mortgage is right for you.


Can I apply if I didn't buy my present house with FHA mortgage insurance?


Yes. It doesn't matter if you didn't buy it with an FHA-insured mortgage. Your new FHA HECM will be FHA-insured.


What types of homes are eligible?


To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.


What's the difference between a reverse mortgage and a bank home equity loan?


With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home, sales price or FHA's mortgage limits, whichever is less. Generally, the amount you may be eligible to borrow depends on such criteria as the value of your home and the applicable interest rate.


With a HECM, you don't make monthly principal and interest payments, the lender pays you according to the payment plan you select. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed on or forced to vacate your house because you "missed your mortgage payment."


When does my loan become due and payable?


A HECM loan must be repaid in full when you pass or sell the home. The loan also becomes due and payable if:


·         You do not pay property taxes or hazard insurance or violate other obligations.

·         You permanently move to a new principal residence.

·         You, or the last borrower, fail to live in the home for 12 months in a row. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home.

·         You allow the property to deteriorate and do not make necessary repairs.


Will I still have an estate that I can leave to my heirs?


Should you pass prior to the sale or a refinancing of your reverse mortgage loan, your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, will be distributed as instructed in your Will or in the absence thereof, as provided by law to your heirs.


How much money can I get from my home?


The amount you can borrow depends on:


·         Age of the youngest borrower

·         Current interest rate

·         Lesser of the appraised value of your home, the HECM FHA mortgage limit for your area or the sales price

·         The initial Mortgage Insurance Premium (MIP) option you choose (2% HECM Standard option or .01% HECM Saver option)


How do I receive my payments?


You have five options:


·         Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

·         Term - equal monthly payments for a fixed period of months selected.

·         Line of Credit - unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.

·         Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home.

·         Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

Vanguard Funding LLC, NMLS# 2675
300 Garden City Plaza, Garden City, NY  11530
Toll Free:  (877) 881-0010
Office:  (516) 403-9100
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NY – Licensed Mortgage Banker: New York State Department of Financial Services, License # LMBC No:107065
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