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FAQs

What is a Reverse Mortgage and who does it benefit?

A reverse mortgage is also known as a Home Equity Conversion Mortgage (HECM). The program was created by the Federal Housing Administration (FHA) specifically to help homeowners, aged 62 years and older.

A HECM can provide seniors the means to enjoy home ownership through retirement. It may help reduce financial stress by using the equity from the home to eliminate monthly mortgage payments.

What do I need to qualify?

Since the HECM program was created to help seniors, there is an associated age requirement for the Borrower: 62 years or older. The Borrower must own the home and live in the home as a primary residence.

If the home has a mortgage balance it must be paid in full at the close of the reverse mortgage either with the reverse mortgage proceeds or if needed, cash can be brought to closing by the borrower to satisfy the existing balance.

Education is an important part of the process and borrowers must complete a HUD required counseling class to review program features.

What is a Reverse Mortgage and who does it benefit?

Reverse Mortgages were created and are insured through FHA. They have additional consumer protections, like retaining title to the home and the non-recourse feature (neither you nor your heirs are personally liable for any amount of the mortgage that exceeds the value of your home), built into the programs that might not be required in other loan options. There are hundreds of thousands of homeowners, like you, who have already taken advantage of the benefits and who are experiencing peace-of-mind that comes from a reverse mortgage.

Is Reverse Mortgage right for everyone

Like most financial options, a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), may not be right for everyone or every situation. If you are planning on moving out of your home in the near future you may want to consider other options or possibly consider a Purchase Reverse Mortgage for your next home. Although reverse mortgage proceeds do not affect Social Security benefits or Medicare, if you are currently receiving any state-based financial assistance, it may affect eligibility.

The HECM is designed as part of a long-term plan in homeownership; for many seniors facing financial challenges during retirement a reverse mortgage has proven to be an effective solution. Contact your local On Q Reverse Mortgage Consultant for more details.

Are there costs to a Reverse Mortgage?

Like any mortgage, there are fees that cover costs related to the loan itself and the process of escrow and title. You can expect the following fees when entering into a reverse mortgage: loan origination, title insurance, recording, credit application, and the initial payment of the mandatory mortgage insurance premium (IMIP). For refinance transactions, the fees are financed into the loan itself so the only out-of-pocket expenses are typically the appraisal and HECM counseling fee.

How do I know how much money I qualify for?

There are certain factors that determine how much you will receive from the lender.
Based on today’s program requirements, the loan amount is primarily based on the age of the youngest person on title, the appraised value of the home (up to FHA maximum lending limit of $636,150) and current interest rates.

Do I still hold the title to my home?

Yes. You hold title to your property, are required to live there as an owner-occupant, and continue to be responsible for the timely payment of associated property taxes, homeowner’s insurance and, if applicable, homeowner’s association (HOA) fees.

When I leave the home, how is the loan paid back?

When, for whatever reason, you leave the property as its primary resident or sell the property, the principal loan balance plus deferred interest will need to be repaid. In many instances, in order to repay the debt, your heirs will sell the home to satisfy the debt and some elect to refinance the reverse mortgage into another type of loan in order to retain the property. Any remaining proceeds or equity after the debt repayment will become an asset to those heirs or estate. An added benefit to the reverse mortgage is that no matter what happens to property values during the life of the loan, at the time of the transfer of property (refinance or sale,) the debt owed can never exceed the current value of the property. This is due to the mandatory MIP insurance placed on the property.

Is there anything I should give careful consideration of regarding a Reverse Mortgage?

Like other financial decisions, you should always examine all features of a program to ensure it is right for you. A reverse mortgage can provide many options. Interest rates, how you design the reverse mortgage loan proceeds, and how quickly you utilize the funds determine how fast or slowly the loan balance grows. As with any property investment, there may be market fluctuations (up or down) that affect the property’s value over time.

Should a Reverse Mortgage be part of my financial planning portfolio?

A reverse mortgage can provide additional funds in retirement. It can also prevent the depletion of your other assets, allowing them to perform better. This may create additional security and a rainy day account for unexpected expenses. We encourage you to consult with your financial and tax advisors to see if a reverse mortgage might be right for you. We welcome the opportunity to educate you and your advisors on what the programs can offer.

Are there additional resources available to get more information on Reverse Mortgages?

Before making any financial decision, always consult professional industry experts. You can also access information quickly here: Housing and Urban Development (HUD) Portal.

Removing The Myths Behind Reverse Mortgages

For more than seven years, Purchase Reverse Mortgages have been available to consumers, ages 62 and older, to enhance and supplement retirement years. These loan products are unique compared to other loan products. As such, there are some misconceptions or myths associated with Reverse Mortgage loan option(s).

In an effort to help you better understand Reverse Mortgages, the following showcases some of the most common myths with an explanation of the truth.

Myth 1: A reverse mortgage transfers ownership from the Borrower to the lender

Truth: Lenders provide mortgage services to their Borrowers—they lend money; they fund loans. The same holds true with a Reverse Mortgage.

At the end of the term of the loan, the lender is entitled to be paid back. To ensure this takes place, a lien will be added to the title. With that lien, the lender will receive the loan pay back once the property is refinanced or sold.

Moreover, the home owner retains the title of the property throughout the life of the loan, as long as the taxes and insurance associated with the property are kept current and the condition of the home is reasonably maintained.

Myth 2: With a reverse mortgage, heirs of the homeowner cannot inherit the home.

Truth: The provisions a homeowner(s) sets up in their estate as to who is the rightful heir of the property upon their death will remain in effect: a reverse mortgage does not change that.

With a reverse mortgage, upon the passing of its youngest homeowner, the estate can sell the property but the lender must be paid back the loan amount in addition to any mortgage insurance premiums and interest due on the loan.

Moreover, the home owner retains the title of the property throughout the life of the loan, as long as the taxes and insurance associated with the property are kept current and the condition of the home is reasonably maintained.

Here’s an example:

Myth 3: The homeowner has no guarantee of staying in the home.

Truth: A reverse mortgage provides that homeowners, age 62 and older, can live in their home through the life of the loan, which extends to the 150th birthday of the youngest homeowner. As long as the property is maintained in reasonably good condition and the property taxes and insurance are paid current, the homeowner(s) will enjoy the benefits of home ownership.

With a reverse mortgage, that means a lifestyle with NO MONTHLY MORTGAGE PAYMENT.

In the event that the home must be sold, and the amount owed on the property exceeds the current market value, the homeowner is only obligated to pay back the lesser of the two, loan amount or value.

Moreover, the home owner retains the title of the property throughout the life of the loan, as long as the taxes and insurance associated with the property are kept current and the condition of the home is reasonably maintained.

Why?

A reverse mortgage is a non-recourse loan.

What does that mean?

Even in the event that the loan balance exceeds the value of the home, the borrower is not personally responsible to pay back the shortfall.

Here’s an example:

Myth 4: Entitlement to my senior benefits may be compromised with a Reverse Mortgage.

Truth: Government entitlement programs such as Social Security and Medicare are not affected by a reverse mortgage. However, need-based programs such as Medicaid can be affected.

Consider contacting a representative from your local benefits office(s) for more information on your specific situation.

Myth 5: The Money a Borrower accepts from a reverse mortgage is taxable.

Truth: Although reverse mortgage proceeds seem like income to borrowers, money in the form of cash, income stream or a line of credit from a reverse mortgage is considered borrowed money and thus is not taxable income by the IRS.

Please consult your tax advisor.

Myth 6: Reverse Mortgages come with a lot of upfront costs.

Truth: Like most consumer financing programs, there are costs associated with a reverse mortgage.

The only upfront costs are for an appraisal (needed to assess the property’s current value) and for the mandatory HECM counseling session. All other closing costs (title, escrow, origination, taxes, insurance, MIP) are typically financed into the loan amount.

Myth 7: Reverse Mortgages come with a lot of upfront costs.

Truth: While a traditional home equity loan and the reverse mortgage line of credit are both ways to access equity that has built up in the home, there are a few significant differences.

The Reverse Mortgage line of credit can never be frozen, reduced or cancelled if market conditions change (as long as program requirements are met: keeping current on taxes, insurance and home maintenance). Additionally, the reverse mortgage line of credit has a built in growth feature that can give a borrower access to their equity in the event that it increases.

Please see additional differences below:

Contact an On Q Reverse Mortgage Manager for full details and to see if a reverse mortgage might be right for you.

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Just some of our happy clients

"I am very grateful to have been able to work with you and your associates in obtaining a reverse mortgage. My financial planner said that I was the perfect candidate and recommended using you to expedite everything. It went very smoothly and my income stream provided a preservation of my portfolio which has eased my mind. Thank you so much."

– Miki H.

"Thank you for taking care of this for my mom, this is just what she needed to give her some financial breathing room."

– Renee C.

"We selected On Q Financial Services after a recommendation from our financial advisor. We received a thorough education in not only the process but the important nuances that should be considered before making a final decision. On Q respected our need for detailed communication and also provided an understanding and insight into the process. We look forwards to recommending On Q Financial Services to our professional and personal associates, not only for your firm’s expertise but more importantly, the terrific personnel with whom we dealt along the way."

– Ted & Linda R.

"A few years ago I was living in a house that did not suit my needs. With the assistance of Samantha Alspaugh, I signed up for my first Reverse Mortgage line of credit. Using this relatively low interest loan for construction funds enabled me to build a new house appropriate for my stage in life.
When my new house was completed, I sold the prior house and paid off my first Reverse Mortgage. I moved into my new home and then contacted Samantha for my second Reverse Mortgage Line of credit. My new home has some title and ongoing quirks. In spite of these issues a determined Samantha stuck with it and ultimately arranged my second Reverse Mortgage Line of Credit.
I first used this loan as a bridge loan, then I paid it almost off (not quite zero to keep the loan open). Now thanks to the financial flexibility offered by a Reverse Mortgage Line of Credit, I live in my dream home debt free and watch the line of credit funds available to me increase on a regular basis. Most importantly, I have peace of mind knowing that I have emergency funds available to me anytime just a phone call away.
Life is good"

– Dale Z.

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