• No income or health requirements
• Minimal credit verification requirements
• Limited paperwork
• No monthly home loan payments
• Loan proceeds may be tax-free. Consult a tax advisor for more information.
• Loan proceeds do not affect Medicare or Social Security
• Supplemental Security Income (SSI) and/or Medicaid/MediCal are usually not affected. Consult your local senior services agency for more information.
• Repayment is not due until the last borrower sells the home or permanently leaves the home.
• Reverse mortgages are “non-recourse,” which means that you, your heirs, or your estate will not owe more than the appraised value of the home at the time repayment is due – even if the loan balance exceeds the value of your home.
• The title to your home stays in your name. A reverse mortgage is only a lien against the property just like a standard home loan.
  

Typical Uses of Reverse Mortgage Proceeds 
Because there are no restrictions on the use of funds received after you have paid off any other home loan debt you may currently have on your home, reverse mortgages can offer you a monthly source of funds to help provide you more choices, financial control, and flexibility in retirement years. Common uses for such funds include:

• Paying for everyday expenses
• Making home repairs and improvements
• Covering medical expenses
• Purchasing long-term care insurance
• Establishing trusts
• Helping to financially support family members – funding grandchildren’s college tuition
• Paying off loans or bills
• Maintaining or improving your quality of life 
  

 Eligibility
To qualify for a reverse mortgage, all borrowers on title to the home must be at least 62 years of age, occupy the home as their primary residence, and possess sufficient equity in the property to meet the lender’s requirements. Properties that qualify for a reverse mortgage include “Planned Unit Developments” (PUD), one to four unit owner-occupied residential buildings, single-family residences, and condominiums. Vacation homes or other secondary residences, mobile or manufactured homes, rental properties, or properties composed of more than four dwelling units are typically not eligible. 

Repayment 
A reverse mortgage loan is required to be a first lien loan, which means any existing loans or liens against the property must be paid off at the closing of the reverse mortgage loan. There are no monthly home loan payments due during the life of the loan. Repayment is due (the loan “matures”) when the last borrower no longer lives in the home as their primary residence or the home is sold. (Please note: the repayment date may become accelerated if you fail to maintain the property, fail to keep the property insured, fail to pay the property taxes, declare bankruptcy, or abandon the property.) Your heirs have the option to sell the home or refinance it with a different type of home loan loan to repay the reverse mortgage loan. 

Before Considering a Reverse Mortgage, Become Knowledgeable and Educated 
(1) Get the Information You Need
Before you can determine if a reverse mortgage is right for you, it is important to understand what it is and how it works. In addition to the information provided in the H.O.M.E. Web site, free resources are also available through HUD (U.S. Department of Housing and Urban Development) at http://www.hud.gov/buying/rvrsmort.cfm , the NRMLA (National Reverse Mortgage Lenders Association) at http://www.nrmlaonline.org/ , and other community services organizations. You may also visit Countrywide Reverse Mortgage. The reverse mortgage specialist at the lender you choose should provide you with additional explanations of the features and benefits of a reverse mortgage with no obligation on your part. The specialist should help you evaluate all of your options to identify what is best for your individual situation. 

(2) Get Educated
Various lenders offer different reverse mortgage programs. If you choose the Home Equity Conversion Mortgage (HECM) product offered by HUD, counseling from a HUD-approved counselor is required. Your lender’s reverse mortgage specialist will provide you with a list of approved counselors in your area. If you choose a Countrywide Reverse Mortgage product, HUD-approved counseling is completely optional, but it is encouraged. 

Loan Costs
As with all home loans, there are costs involved. However, because the lender makes payments to you on a reverse mortgage rather than you making payments to the lender, the cost structure is different. These costs, several of which are typically deducted from your gross benefit at loan closing, may seem very high to you. As part of the reverse mortgage process you will receive a total annual loan cost disclosure required under the Federal Truth in Lending Act. The disclosure points out that the effective cost of any reverse mortgage loan depends on how long you keep the loan and how much your house appreciates in value. When your costs are calculated on an annual basis over the term of the loan, rather than as an up-front lump basis, it becomes clear that the longer you keep a reverse mortgage, the lower the costs relative to your benefits are. It is important to keep this in mind when you review the loan costs.

There are typically three categories of costs that will affect your benefits: (1) the interest rate on the loan; (2) origination, mortgage insurance and other closing costs; and (3) lender servicing costs. These are described more fully below. 

(1) Interest Rate
Lenders charge interest on the loans they make. The reverse mortgage is no different. However, how you pay that interest is different. You don’t make monthly interest payments during the life of the loan. Instead, the interest you owe for each month is added to the principal balance each month, accumulating during the loan term. It is then all paid at once at maturity as part of paying off the loan. All reverse mortgage products consist of an adjustable rate mortgage. Depending on your choice of product and lender, the interest rate will either adjust monthly or annually based upon the index you choose from those offered by your lender. The index to which a reverse mortgage is linked should be published by the Federal Reserve Board and/or in the Wall Street Journal. 

(2) Loan Origination and Mortgage Insurance Costs
As indicated, a lender incurs costs in originating a reverse mortgage, just as it does when making a standard home loan. The costs of a reverse mortgage vary by lender and product and usually can be financed through the loan. Typically, the appraisal fee is the only expense you are required to pay in cash (or by check or credit card). Other lender origination costs generally include the following:

• Origination Fee: This fee covers a lender’s operating costs for originating a reverse mortgage. This fee can vary substantially by lender and product. It is generally 2% of the value of your home.
• Mortgage Insurance Fee: The mortgage insurance fee is based on the loan amount and varies by the type of program. It is set aside by the lender or used to buy insurance from the FHA or a private insurance company to assure that your payments will continue if the loan servicer goes out of business and/or that you will never owe more than the appraised value of your home at loan maturity.

• Appraisal Fee: This may vary by area and is the cost of having an appraiser assign a current market value to your home and identify any safety or structural defects, such as foundation, roof, or termite damage. To be eligible for a reverse mortgage, the home must be structurally sound and comply with all home safety codes. If the appraiser identifies property defects, you will need to hire a contractor to make the necessary repairs. Once the repairs are complete, the same appraiser is paid to re-inspect the property to confirm that the repairs have been completed.

• Title Insurance: The purpose of title insurance is to protect against potential loss resulting from disputes over property ownership. These disputes may involve claims made by creditors, heirs, previous owners or other parties. The lender will require a title insurance policy to protect its lien interest. The cost of the lender’s policy varies depending on the loan amount. The lender’s policy of title insurance does not provide any protection for you.

• Other Closing Costs: Other costs that are commonly charged include a credit report fee, a flood certification fee, an escrow, settlement or closing fee, a tax service fee, a document preparation fee, recording fees, fees or taxes that may be charged by state or local governments in connection with home loan, courier fees, pest inspection, and/or survey fee.

(3) Servicing Fee Set-Aside
Almost all reverse mortgage programs have a servicing fee “set-aside.” The amount set aside from your proceeds at closing is based on an estimate of the monthly servicing costs (typically $30 to $35 per month) over the term of the loan and is deducted from your gross benefit, thus reducing the amount of the loan made available to you. During the time you have the loan, the monthly fee amount is added to the outstanding principal balance each month.

Be sure that your lender’s reverse mortgage specialist provides you with a customized benefit calculation sheet showing the different products and costs for your specific situation.

For additional information, visit Countrywide Reverse Mortgage.