Ask the Expert
The Reverse Mortgage Times is proud to announce that Brian Cooper, a nationally recognized reverse mortgage expert, has agreed to be the moderator of “Ask the Expert”. Brian has been featured on numerous radio and television talk shows as a reverse mortgage expert/advisor.
BRIAN COOPER
THE FORUM
Francis C. (Lexington, MA)
Question: I’m trying to describe to my son what a reverse mortgage is. Can you provide me with a brief description?
Answer from Brian Cooper: First, it is a great idea to consult with your son or any other trusted advisor.
If your son doesn’t have the time to read through this site, I would describe it to him this way. A Reverse Mortgage is a special type of home loan that lets a homeowner convert the equity in his/her home into cash. The equity built up over years of home mortgage payments can be paid to the homeowner: in a lump sum, in a stream of payments, or as a supplement to Social Security or other retirement funds. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrowers no longer use the home as their principal residence. HUD’s Reverse Mortgage provides these benefits, and it is federally-insured as well.
Charlotte A.
Question: What are the minimum and maximum amounts that I can borrow?
Answer from Brian Cooper: The maximum amount you can borrow is based on a HUD formula that factors in the age of the youngest borrower, the expected interest rate, and the “plan-adjusted value” for the local county. The plan adjusted value, or “maximum claim amount” is the lesser of the appraised value of your home or the plan adjusted value for a one-family residence that can be insured by FHA in your area. There is no minimum borrowing amount.
Linda C. (Houston, TX)
Question: How do I calculate the amount of the monthly payment I will receive?
Answer from Brian Cooper: How much you receive in monthly payments depends on the age of the youngest borrower, the current interest rate, the plan adjusted value, and the length of time that you will be receiving payments (for a fixed period of time or for as long as you live in your home). The older you are, the more benefit you qualify for, the larger your payments are likely to be. This is not a calculation you are able to perform. Your Reverse Mortgage Specialist will present you with a printout which calculates your payment.
Philip G. (Columbia, MD)
Question: What are the fees I’ll have to pay to obtain a reverse mortgage?
Answer from Brian Cooper: The fees you will be charged (except for the appraisal fee) are typically rolled into your loan balance so that you do not have to pay for them in cash. You will need to pay for the appraisal. This is your only out of pocket expense for this loan. The cost can range from $300 to $450 depending on your area. Included in the other fees is an origination fee (typically 2%). Also included is a mortgage insurance premium—which is divided into two parts: an upfront premium of 2% of the plan adjusted value and ½% per year on your mortgage balance. The monthly servicing fees range from $30-$35. Both the monthly servicing fee and the yearly insurance premium will be charged to your loan balance as the charges occur. Finally, included will be other normal closing costs which your Reverse Mortgage Specialist will provide you with a Good Faith Estimate of these closing costs.
Nguyen P.
Question:
Will my heirs owe anything to the mortgage lender if I die?
Answer from Brian Cooper: Upon your death, the loan balance, consisting of payments made to you or on your behalf plus accrued interest, becomes due and payable. Your heirs may repay the loan by selling the home or by paying off (refinancing) the HECM loan so that they may keep the home (identical to a “forward” mortgage). If the loan exceeds the value of your property, your heirs will owe no more than the value of the property. FHA insurance will cover any balance due the lender. No additional financial claims may be made against your heirs or estate.
Mark S.
Question: If my home appreciates in value during the mortgage term, am I entitled to that money?
Answer from Brian Cooper: Under the HECM Reverse Mortgage, you are legally required to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.
Winston T. (Mountain View, CA)
Question: What if I decide to sell my home?
Answer from Brian Cooper: No problem. If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender. You, or your estate, will receive any proceeds exceeding the loan balance.
Arun B.
Question: Can I sell my home to my children and continue to live in it?
Answer from Brian Cooper: If you sell your home to your children or any other individual, the Reverse Mortgage will be due and payable at settlement. After the loan is repaid, any arrangement for your continued occupancy of the property must be made with the new owners.
Elizabeth P. (Orangeburg, SC)
Question: Is this a fixed rate loan?
Answer from Brian Cooper: Fixed and adjustable rates are offered.
Rose W.
Question: I’m concerned that the payments will affect my Social Security, Medicare, Supplemental Security Income or Medicaid benefits.
Answer from Brian Cooper: HECM Reverse Mortgage advances can be added to your liquid assets under some programs. Proceeds should not affect Social Security, Medicare or pension benefits. I suggest you consult the local offices for these programs or any other to determine how HECM Reverse Mortgage payments may affect your particular situation.
Ethan X.
Question: Can I get a reverse mortgage on my vacation home?
Answer from Brian Cooper: Generally vacation homes or other secondary residences, mobile/manufactured homes that are not attached to a permanent foundation, rental properties of more than four units and homes on leased lands do not qualify.
William W.
Question: My home is in a “living trust.” Does this matter?
Answer from Brian Cooper: A homeowner who has put the home in a living trust can usually take out a Reverse Mortgage. The trust documents would need to be reviewed by the lender.
James O.
Question: Do I have to pay taxes on the reverse mortgage proceeds?
Answer from Brian Cooper: Currently, the Internal Revenue Services treats monies received from a Reverse Mortgage to be loan advances and not taxable income. For your specific situation, I recommend that you consult your tax advisor.
Grant V. (Salt Lake City, UT)
Question: Can I deduct the interest charged on my loan principal for tax purposes?
Answer from Brian Cooper: The interest accrues and is deductible when the loan balance and interest is repaid or when the borrower permanently leaves the property. For your specific situation, I recommend that you consult your tax advisor.
