Introduction to Reverse Mortgages

Reverse mortgages are increasing in popularity with seniors who have equity in their homes and want to supplement their income. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA-approved lender.
A Reverse Mortgage can be used to pay off an existing mortgage, allowing seniors to securely remain in their own home for the rest of their lives, free from the burden of monthly mortgage payments.   After paying off any existing liens against your home (if any), any remaining loan principal is available for you to use for whatever you wish, without restriction.  You may take this equity as a single, up front, cash payment at closing (Fixed option), or select the variable, line of credit (LOC) option, which makes your home equity available to you to draw upon, as needed, in the future.  There is a built in 'appreciation' factor included in the variable (LIBOR) LOC loans which actually increases the principal amount available over the years as your home value appreciates.
The FHA mortgage insurance feature, included by law in every Reverse Mortgage, protects borrowers against ever being obligated for more than their home is worth for the rest of their lives (non-recourse loan).  So, if you live in your home for a long time, and the interest eventually increases the loan balance above the appraised value of the home, the government insurance, which all borrowers pay into, covers the excess loan balance over the home value when you no longer live in the home.  No debt is passed on to the borrower or borrower's estate.

Borrower Responsibilities: While no loan payments are required as long as the borrower continues to occupy the home, the borrower is required to:

• Maintain homeowner insurance
• Pay property taxes
• Maintain the home in good repair, preserving the home value.

Social Security: Cash distribution from a Reverse Mortgage will not affect your Social Security or Medicare benefits.
       The proceeds from HECM Loans are not considered income.

Title: You or your estate retain full ownership until the home is sold.

The Home Equity Conversion Mortgage (HECM) lending process:

• Complete an initial, no obligation, evaluation with an approved broker/lender (Golden Mortgage Request Form) to evaluate your eligibility for a Reverse Mortgage, and obtain personalized initial estimates of possible loan terms, for your consideration.
• Complete the required, independent training session with an HUD-approved HECM counselor, who will help you in fully evaluating the suitability of a Reverse Mortgage to your personal situation, answering any questions you may have. This is easily accomplished at home over the phone. Golden Mortgage can provide you with a list of approved counseling services to select from.
• Sign the initial loan application paperwork to start the lending process.
• Home Appraisal will establish the exact home value used in setting the available loan amount. The appraisal may identify some home repairs which need to be completed to qualify for the loan.
• Closing: Complete loan terms disclosure is provided and final loan papers are signed. All existing liens against your home are paid off, and remaining available principal is either paid to you as a lump sum (Fixed option), or your line of credit is set up for you to use in the future (LIBOR variable rate option). Note that you may also take a partial up front cash payment with the LIBOR option, leaving the remaining principal available in your line of credit.
• Payoff: You may sell your home at any time and pay the loan balance at the time of sale, keeping the balance for yourself (just like any mortgage). If you move out, you must settle the loan within a year. If the home value is insufficient to pay the loan, the insurance will cover the difference. Note, if you, or your estate, decides to pay off the loan and keep the house, they must pay the total balance due on the loan - this is not insured. To have the insurance protection, the home must be sold or surrendered.