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Five Common Reverse Mortgage Questions in Four Minutes

Common Advisor Questions

I’ve compiled the answers to five common questions I receive from advisors (and their clients).

What does “non-recourse” mean?

Since the HECM reverse mortgage is an FHA insured, non-recourse loan, the lender’s ONLY “recourse” is the net proceeds from the sale of the home, even if the client owes more than the home is worth. The FHA Mortgage Insurance Fund bridges the difference so that neither the client nor their estate/heirs are responsible for repayment of the note, and no deficiency judgment can be taken.

How much money can my clients get from a reverse mortgage?

The amount of money a borrower is eligible for is based on three primary factors:

  • Age of the youngest borrower
  • Value of the property, up to the current lending limit ($726,525 at time of posting)
  • Interest rate associated with the selected program

At time of posting, a 65-year-old can receive about 40% of the value of their home.  To calculate what your client’s benefit may be, use this online calculator: www.HousingWealthCalculator.com

What if my client’s spouse is not 62 or older?

To qualify, at least one borrowing spouse must be age sixty-two or older. A younger partner is considered a Non-Borrowing Spouse and need only be over eighteen. Spousal protection was enhanced with the Reverse Mortgage Stabilization Act of 2013, the 2015 Financial Assessment, and the 2017 HECM overhaul. A younger spouse can remain on title and does not face displacement if the older spouse predeceases them.

Are my clients responsible for paying their taxes?

There are four basic requirements the borrower must do to maintain the HECM reverse mortgage:

  1. The home must remain the principal residence of at least one of the borrowers. They can own more than one residence, but only the primary residence can have a HECM in place.
  2. The home must be maintained in a lendable condition. For example, the borrower cannot allow a tree to fall through the roof and not get the roof repaired.
  3. Borrower must keep basic homeowners’ insurance in force.
  4. Borrower must pay all property-related taxes.

Can my clients sell their home if they have a reverse mortgage?

The borrower never gives up ownership of the home or comes off title. If they decide to sell their home, the cash advances, interest, and other finance charges related to the reverse mortgage must be repaid to the lender. ALL remaining proceeds, beyond the amount that is owed, belong to the borrower.

Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

Categories: Advisors, Ask Don Graves, AskDonGraves, Financial, Financial Planning, General/Misc, HECM Basics, Legal, Real Estate

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