Frequently Asked Questions:

Q. Can a Reverse Mortgage be taken out if there is already a conventional mortgage on the home?
A. Yes, but existing mortgages must be paid off at closing. The proceeds from the Reverse Mortgage may be used for that purpose. This eliminates a monthly mortgage payment.


Q. What about a home in a “living trust”?
A. A home owner who has put the home in a living trust can usually take out a Reverse Mortgage, subject to review of the trust documents.


Q. What are the up front costs associated with a Reverse Mortgage?
A. The borrower will pay an origination fee and actual closing costs, including charges by the title and escrow companies, and an insurance fee to HUD when applicable. All of these costs can be financed as part of the initial loan advance.

Q. Can the interest charged on my loan principal be deducted for tax purposes?
A. The interest accrues and is deductible when the loan balance and interest are repaid after the borrower permanently leaves the property.

Q. Will I have any tax liability for the Reverse Mortgage Proceeds?
A. Currently the Internal Revenue Service treats monies received from a Reverse Mortgage to be a loan advances and not taxable income. *(Consult your tax advisor).

Q. How do the monies from a Reverse Mortgage affect Social Security and Medicare?
A. The proceeds from a Reverse Mortgage do not affect these benefits.

Q. What is due when the loan is repaid?
A. The borrower pays back the cash advances they have received plus accumulated interest and any fees/costs that were financed.

Q. What if I owe more than my home is worth?
A. All Reverse Mortgages are “non-recourse” loans, which means that the borrower can never owe more than the value of the home, regardless of the loan balance.

Q. When does the loan become due and payable?
A. The loan is due and payable when the borrower sells the property, permanently leaves the home, or passes away. In the case of a couple, it is the second to move out or die that triggers repayment. Until these events take place you live in your home and make no payments to the lender.

Q. Does the lender take the house?
A. This is a misconception; a Reverse Mortgage is merely a loan against the property. The title remains in the name of the borrower and the lender is only repaid the loan balance.

Q. Do I or my heirs have to sell the property to repay the loan?
A. No, repayment can be accomplished by refinancing the existing Reverse Mortgage with a conventional mortgage.