Three business days after signing the closing documents, your funds will be disbursed and any outstanding liens or existing mortgages will be settled with the loan money. The reverse mortgage application process usually takes 30 to 45 days from start to finish and consists of five main steps:. However, the longest part of the reverse mortgage lending process is the decision-making process that leads to the application. The appraisal schedule is an element that is completely beyond the lender's control.
In many cases, the evaluation can be completed in a couple of weeks, but depending on the region, it can take up to two months or longer. These FAQs are organized in the order in which they appear during the loan origination process. If you read all the questions from start to finish, you'll go through the whole process. Lenders must conduct a financial evaluation of each reverse mortgage borrower to ensure that they have the financial capacity necessary to continue paying mandatory obligations, such as property taxes and home insurance, as stipulated in the loan agreement.
If a lender determines that the borrower may not be able to comply with property taxes and homeowner's insurance payments, he or she will be allowed to set aside a certain amount of loan funds to pay for future charges. For the first 12 months after closing, the borrower cannot access more than 60 percent of the loan's disposable income. In the thirteenth month, the borrower can access as much or as little of the remaining funds as he wants. There are exceptions to the 60 percent rule.
If you have an existing mortgage, you can cancel it and keep an additional 10 percent of the available funds, even if the total amount used exceeds 60 percent. You are also charged an annual MIP equivalent to 0.5 percent of the outstanding loan balance; however, this fee will not be deducted from disposable loan income. Rather, it builds up over time and you pay it back once the loan is due and payable. The MIP guarantees that if the company that manages your account, commonly called a “loan servicer”, goes bankrupt, the government will step in and ensure that you continue to have access to your loan funds.
In addition, the MIP guarantees that you will never owe more than the value of your home when you must repay the HECM. The FHA considers the mortgage insurance premium to be a “fully accrued” premium at the time the loan closes, and these mortgage insurance premiums are not refundable. The NRMLA strongly recommends that you consult an income tax professional for information on the deductibility of your interest related to your reverse mortgage account. How much can a reverse mortgage offer you? Enter your own information and get a quote.
While each application is unique, the following is an overview of the process for obtaining and closing a reverse mortgage. You can pay off your existing mortgage with a reverse mortgage, money from your savings, or the help of a family member or friend. For more information on whether a reverse mortgage may be right for you, consult an independent financial advisor. In addition, if the value of the home appreciates and becomes worth more than the balance of the reverse mortgage loan, you or your heirs can receive the difference, Boies explains.
Keep in mind that the interest rate on reverse mortgages tends to be higher, which can also increase your costs. Most homeowners apply for the type of reverse mortgage known as a mortgage capital conversion mortgage (HECM), available through a lender approved by the Federal Housing Administration (FHA). A reverse mortgage provides a way for older homeowners to supplement their income during retirement or pay for home renovations or other expenses, such as health care expenses. The application process for both a traditional mortgage and a reverse mortgage is similar, but the time it takes to obtain a reverse mortgage depends on several factors.
In an effort to increase their incomes and stay in their homes, some are turning to a reverse mortgage to access much-needed cash. As with any mortgage, there are conditions to keep your reverse mortgage in good shape and, if you don't comply with them, you could lose your home. There are fees and costs associated with taking out any mortgage, and reverse mortgages are no exception. According to Boies, the amount of money you can get from a reverse mortgage depends on several factors, such as the current market value of your home, your age, current interest rates, the type of reverse mortgage, your associated costs and your financial evaluation.
If you can't or don't want to pay off the debt, the lender can sell the house to recover the money owed to them, explains Michael Sullivan, personal financial consultant with the nonprofit credit counseling and debt management agency Take Charge America. One of the most popular types of reverse mortgages is the home equity conversion mortgage (HECM), which is backed by the federal government. . .