AECC Frequently Asked Questions:
General:
Reverse Mortgage myths and misconceptions.
Tips for avoiding scams.
Questions:
What is a Reverse Mortgage?
What can I use the money for?
What do I need to qualify for a Reverse Mortage?
How do I receive my Reverse Mortgage payments?
How much money is available to me?
Do I have to pay any closing costs like a traditional mortgage?
What are the tax implications?
How do I get started?
Do I still have to make my monthly payment?
Do I have to sell my home to pay off the loan?
Who can offer a Reverse Mortage?
My home is in a living trust: Can I qualify for a Reverse Mortgage?
Who can offer a Reverse Mortgage?
General: Myths and Misconceptions - top
Reverse Mortgages are revolutionizing the way seniors are securing financing. While HUD's Reverse Mortgage is a safe and federally-insured program that gives older Americans greater financial security, many seniors are bombarded with falsehoods. Please take the time to read through the Myths and Misconceptions and contact a representative if you have any questions. Unfortunately, the relative newness of this program has ignited the old saying, "people fear what they don't understand." So please exercise your own due diligence and get the proper answers; if someone can't answer your question then go to someone who can.
You can receive free information about reverse mortgages by calling 1-866-303-4326 (866.303.HECM), toll-free. Since your home is probably your largest single investment, it's smart to know more about Reverse Mortgages, and decide if one is right for you!
The Bank or Lender will take my home.
Not True - The homeowner always retains title to the property and can choose to sell the home at any time. The lender's interest is limited to the amount owed on the Reverse Mortgage, they do not share title. There is no equity sharing on the Reverse Mortgages originated by AECC. There are no prepayment penalties or restrictions on repayment.
My children will be held responsible for repayment of the Reverse Mortgage.
False - The Reverse Mortgage is a non-recourse loan. This means that the lender can only derive repayment of the loan from the proceeds of the sale of the property. Your heirs will not be responsible for the repayment of the loan. Simply, you or your heirs can never owe more than the value of the home regardless of the loan balance. The same rule applies if a catastrophe struck and the value of the home is reduced.
To qualify, my home must be paid off "Free & Clear".
Not True - You may pay off a mortgage or equity loan with a Reverse Mortgage. In fact, many people get a Reverse Mortgage for this reason: to get rid of their monthly payments forever.
I must have good income and credit to qualify.
False - A Reverse Mortgage has no income or credit qualifications. To qualify you need to be at least 62 years of age and your home must be your primary residence and the home must have enough equity. Consult your representative for further info.
The Reverse Mortgage requires that I make monthly payments.
Not True - There are never monthly payments. The borrower is responsible for payment of taxes, insurance, and general upkeep of the home and nothing more.
If I do a Reverse Mortgage it will eat up all my equity and leave nothing for my kids.
False - "Retained Equity" is a very important concept to grasp. Realize that your property will continue to appreciate (the whole value of the estate) and you pay interest on only the smaller amount borrowed. Please consult your representative for amortization tables that might apply to your specific situation.
If I get a Reverse Mortgage, I cannot sell my home.
False - If you decide to sell your home, the reverse mortgage is like any other loan that must be paid off at closing. There are no restrictions on prepayment or penalties for paying off your loan or selling your home.
If my lender changes, my loan terms can change.
Not True - A reverse mortgage is secured by two deeds of trust. Once executed, the terms are defined and cannot be changed as long as the deeds remain in force.
A Reverse Mortgage will be a burden to my heirs.
False - Your heirs will only have to decide to refinance the debt if they wish to keep the home or sell in order to pay the balance. Actually, a Reverse Mortgage allows a 'reasonable time' (usually at least 6 months) for your heirs to settle the estate and decide what to do. This is a greater amount of time than traditional mortgages provide and there is no period of default during this time.
A Reverse Mortgage will affect my Social Security, Medicare/Medicaid benefits.
Not True - Generally the money from a Reverse Mortgage is considered borrowed money and not income. For some programs, monthly draws must be spent and not accumulated, but for most the money is not considered disqualifying. Please consult with an advisor or your local Agency for Aging for your specific situation.
In order to qualify for a Reverse Mortgage, I must be in good health.
False - Your age and your home are the only qualifying criteria considered for a Reverse Mortgage. A Reverse Mortgage has no health requirement.
General: Tips for avoiding scams - top
Seniors are targeted by scam artists every day through the mail, on the phone, online, and in person. American Equity Conversion offers the following tips to help you and your family and friends avoid becoming the victims of unscrupulous perpetrators.
BEWARE of websites or call centers that advertise that they are industry watchdogs or state that they are "not a lender". Most of these sites are fronts for mortgage brokers or are gathering seniors' identity and contact information to sell as 'leads' to other mortgage companies. If unbiased information is what you are looking for, go to
www.aarp.com
www.reversemortgage.org
www.reverse.org
www.help4srs.com
Our experience has indicated that these sites provide information on reverse mortgages without attempting to 'trap' your contact information, steer you to a lender, or sell your information to a mortgage broker. A senior should be able to get the basic qualification information they need by providing their age (birthdate), the county and state in which they live, the amount of debt secured by their home, and their homes value.
BEWARE of anyone who knocks on your door, approaches you on the street or in other public places with offers of generous financial gains. As you well know, financial windfalls are rare. You've learned over the years that diligent hard work gets you ahead. While entertaining the thought of quick riches is nice, don't let these dreams cloud good judgment. Never, under any circumstance, sign over a portion or percentage of the proceeds of a Reverse Mortgage to anyone.
WATCH OUT for scare tactics. Many scam artists will lead you to believe that you will somehow suffer if you don't listen to them or follow their instructions. The only harm that will come of you not listening is to their dishonest livelihood.
DO NOT listen to pushy Reverse Mortgage salespeople, who INSIST on you signing a contract. The Federal Housing Administration (FHA) has put in place several safeguards to ensure you will not be ripped off through a Reverse Mortgage. You MUST see an independent, third-party counselor to review the Reverse Mortgage with you. If you have not been told about this safeguard, it is an immediate red flag.
DO NOT sign up for a Reverse Mortgage over the phone. Another of the safeguards put in place for you by the FHA is that a Reverse Mortgage MUST be sold in-person. While you can initiate the process by phone, there must be an original signed application.
You CAN have children or other advisors present at your Reverse Mortgage appointment. DO NOT sign up for an appointment if a Reverse Mortgage representative either dissuades you or tells you not to have other people present.
Some other things to look out for are the quality of materials and information presented. This will give you an idea of the professionalism of the company with which you are dealing and probably says a great deal about how your Reverse Mortgage will be handled throughout the process. Also, American Equity Conversion is a proud member of the National Reverse Mortgage Lenders Association (NRMLA) and an Equal Housing Lender. Check to make sure you are dealing with a member of NRMLA.
If you are suspicious of fraud, please report it immediately to your local district attorney's office for investigation.
American Equity Conversion is one of the fastest growing Reverse Mortgage lenders in the country. The company has staff dedicated to the sole purpose of creating financial solutions for seniors so they can focus 100% of their attention to improving the lives of America's greatest generation. Please see our testimonials to see the service we strive to provide. If you have any questions about the company, please contact us at (866) 303-4326 or (866.303.HECM).
Q: What is a Reverse Mortgage? - top
A Reverse Mortgage is a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a Reverse Mortgage can provide seniors with the financial security they need to fully enjoy their retirement years.
The Reverse Mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular first mortgage or home equity loan, a lender makes payments to you.
While a Reverse Mortgage loan is outstanding, you continue to own the home and hold title to it.
Q: What can I use the money for? - top
The money from a Reverse Mortgage can be used for ANYTHING: daily living expenses; home repairs and home modifications; medical bills and prescription drugs; pay-off of existing debts; continuing education; travel; long-term health care; prevention of foreclosure; and other needs.
If your home needs physical repairs (mandatory repairs) in order to qualify for a Reverse Mortgage, a portion of the proceeds will be set aside for this purpose.
Q: What do I need to qualify for a Reverse Mortgage? - top
To qualify for a Reverse Mortgage you must be at least 62 and own your own home. There are no income or medical requirements to qualify. You may be eligible for a Reverse Mortgage even if you still owe money on a first or second mortgage. In fact, many seniors get a Reverse Mortgage to pay off a mortgage or line of credit.
Q: How do I receive my Reverse Mortgage payments? - top
You can choose how to receive the money from a Reverse Mortgage. The options are:
- All at once (lump sum)
- Fixed monthly payments (for up to life)
- A line of credit
- Or a combination of these.
The most popular option - chosen by more than 60 percent of borrowers - is the line of credit, which allows you to draw on the loan proceeds at any time.
Q: How much money is available to me? - top
The size of the Reverse Mortgage that you can obtain depends on your age at the time you apply for the loan, the type of Reverse Mortgage you choose, the value of your home, current interest rates, and - sometimes - where you live. In general, the older you are and the more valuable your home (and the less you owe on your home), the larger the Reverse Mortgage can be.
Q: Do I have to pay any closing costs like a traditional mortgage? - top
The costs associated with getting a Reverse Mortgage include the origination fee (which can be financed as part of the mortgage), an appraisal fee, and other charges similar to those for regular mortgages.
Q: What are the tax implications? - top
The money provided to you from a Reverse Mortgage is tax-free, and does not affect regular Social Security or Medicare benefits. However, the funds received from a Reverse Mortgage if not spent may affect your eligibility for certain kinds of government assistance, such as Medicaid or state assistance programs. Consult with your financial planner for details.
Q: How do I get started? - top
Contact AECC on our toll free number (866.303.4326). We will have a representative in your area meet with you to present the details of the program, answer any questions, and gather necessary items for processing.
Before we can process your application for a Reverse Mortgage, you must first obtain a certificate from a Reverse Mortgage counselor. American Equity Conversion will provide you with the names of approved counseling agencies in your area.
The counselor's job is to educate you about Reverse Mortgages, to inform you of other alternative options available to you given your situation, and to assist you in determining which particular Reverse Mortgage product best fits your needs.
Counseling sessions are completed face-to-face or by telephone. Telephone counseling is becoming more prevalent due to its' convenience and availability.
Q: Do I still have to make my monthly payment? - top
No payments are due on a Reverse Mortgage while it is outstanding. The loan becomes due and payable when you cease to occupy your home as a principal residence. This can occur if you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out.
Q: Do I have to sell my home to pay off the loan? - top
The home does not have to be sold to pay off the loan. You (or your heirs) can pay off the Reverse Mortgage and keep the home. In any event, the amount owed on the Reverse Mortgage can never exceed the value of the home at the time the loan must be repaid. Moreover, if the home is sold and the sales proceeds exceed the amount owed on the Reverse Mortgage, the excess money goes to you or your estate.
Q: My home is in a living trust: Can I qualify for a Reverse Mortgage? - top
Subject to the review of the trust documents, most homes in Revocable Living Trusts qualify for Reverse Mortgages.
Q: Who can offer a Reverse Mortgage? - top
Reverse Mortgages are offered by banks, mortgage companies, and other financial institutions. Only institutions licensed with the U.S. Department of Housing and Urban Development (HUD) are able to facilitate Reverse Mortgages.
