+ How does a reverse mortgage differ from a home equity loan?

Both a reverse mortgage and a home equity loan use the equity you have built up in your home to provide you with readily available cash. They differ in that with a home equity loan you must make regular monthly payments of interest and/or principal. However, with a reverse mortgage you do not make any monthly mortgage payments for as long as you stay in the home.

+ Does my current income influence my ability to obtain a reverse mortgage?

Yes, currently you must pass “Financial Assessment” to confirm that you can afford to pay basic property related costs such as taxes and insurance. The requirements to pass are typically less than those required for traditional mortgages. If you do not pass, the lender may require a LESA (Life Expectancy Set Aside) to ensure enough funds have been “set aside” from the loan proceeds to pay for these items.

+ What are the advantages of a reverse mortgage?

Remain independent. A reverse mortgage allows you to remain in your home and retain home ownership. No monthly mortgage payments. You are not required to pay back the reverse mortgage loan nor make any monthly mortgage payments until you permanently move out of the home.

Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free* and will not affect your Social Security or Medicare benefits.

Freedom and flexibility. The money you acquire from a reverse mortgage is yours to use in any way you choose.

*Consult your tax advisor

+ With a reverse mortgage, will the lender eventually own my home?

No. The borrower(s) retains title to the property. The reverse mortgage lender is merely extending a loan to the borrower.

Because the homeowners retain title, they remain responsible for the payment of property taxes, insurance, utilities, home maintenance, and other expenses - just as they would with a standard first mortgage or home equity loan.

+ Can I refinance a reverse mortgage?

Yes. Refinancing can make sense if your home increases in value or interest rates drop.

+ Is it possible for my loan balance to become greater than the value of my home?

No. You can never owe more than what your home is worth. What's more, since the reverse mortgage is what is known as a "non-recourse" loan, the lender cannot seek repayment from your income, your other assets or your estate. In other words, the debt is secured by the property only.

+ Can a reverse mortgage lender take my home away if I outlive the loan?

No, they cannot. And the loan is not due at that time either. In fact, you don't need to repay the loan as long as you or another borrower continues to live in the house, keep the taxes paid and insurance in force.

+ What is the maximum amount of cash that I can obtain?

The amount you can borrow depends on several factors, including your age, the type of reverse mortgage you select, current interest rates, the location of your home, and the appraised value of your home. If you obtain an FHA reverse mortgage the current FHA lending limits for your area will also be taken into consideration. The older you are, the more valuable your home is, and the less you owe on it, the more money you will be able to obtain.

+ How can I use the money I get from a reverse mortgage and are there restrictions?

You can use the money for anything you choose, from daily living expenses, home improvement costs, healthcare expenses, paying off existing debts, delaying receipt of social security income, helping out loved ones or simply enhancing your retirement years - there are no restrictions. For many people, the money provides a "financial security blanket," in case unexpected expenses arise. One product allows for a credit line that grows each year, so funds are there for you to access at any time needed even if many years down the road, and interest only accrues on the balance drawn. Some use the product as part of their overall financial plan, drawing funds as needed VS selling assets in down markets which can significantly harm their growth rate over time.

+ What are my choices in how I receive the money from a reverse mortgage?

With most reverse mortgages you have a wide range of payment options, one of which should be ideal to meet your financial needs:

• You can choose to receive the money all at once, as a lump sum.
• You can receive equal monthly payments as long as one of the borrowers continues to occupy the property as a principal residence.
• You can choose to receive equal monthly payments for a fixed period of months.
• You can obtain a line of credit; which allows you to access funds at times and in amounts of your choosing until the line of credit is exhausted. This is a popular option if you do need funds immediately.
• You can opt for a combination of a line of credit while also receiving regular monthly payments for as long as the borrower remains in the home.
• Or, finally, you can choose a combination of the above.

+ Who can qualify for a reverse mortgage?

Seniors 62 years of age (and in some cases 55) or older qualify.

+ Can I obtain a reverse mortgage if I still owe money on a first or second mortgage?

Yes. You may be eligible for a reverse mortgage even if you still owe money on a first or second mortgage. The funds you would receive from the reverse mortgage would first be used to pay off any existing mortgages you have on the property. It is also now possible to retain your first mortgage if you desire and obtain a reverse mortgage “second” that would go in place behind your existing first mortgage.

+ What types of homes are eligible for a reverse mortgage?

First and foremost, the reverse mortgage must be on the borrower(s) primary residence, that is, where they live most of the year (typically six months or more). Most reverse mortgages are taken out on single family, one-unit homes. Most programs also accept two-to-four unit buildings in which one unit is owner occupied by the borrower, condominiums and manufactured homes built after June 1976. Mobile homes and cooperatives are generally not eligible for a reverse mortgage. Your All California Mortgage, Inc. loan agent will help you determine if your home is eligible.

+ Is a home that is held in a "living trust" eligible for a reverse mortgage?

Yes. In most cases a homeowner who has placed his or her home in a living trust can take out a reverse mortgage. A review of the trust documents would be performed by the reverse mortgage lender to determine if anything in the living trust documents is unacceptable.

+ What kinds of reverse mortgages are available? Are all reverse mortgages the same?

No, actually there are two basic types of reverse mortgages:

• Federally-insured reverse mortgages. Known as Home Equity Conversion Mortgages (HECM), they are insured by the U.S. Department of Housing and Urban Development (HUD). They are widely available, have no income requirements, and can be used for any purpose.
• Proprietary reverse mortgages. These mortgages are held by the companies that offer them and are typically used to facilitate higher loan amounts than offered through FHA HECM's

+ When must a reverse mortgage loan be repaid?

Your reverse mortgage loan becomes due and must be paid in full when one or more of the following conditions occurs:

• the last surviving borrower passes away or sells the home
• all borrowers permanently move out of the home
• the last surviving borrower fails to live in the home for greater than 12 consecutive months (up to 12 months absence is allowed for health care rehabilitation needs)
• you fail to bring current property taxes or insurance
• you let the property deteriorate beyond what is considered reasonable wear and tear and do not correct the problems.

+ What is owed when a reverse mortgage loan is repaid?

When the last surviving borrower permanently moves out of the home or passes away, the reverse mortgage loan becomes due. The reverse mortgage principal, interest charges and service fees (if applicable) are paid from the sale or refinance of the house.

+ How will a reverse mortgage affect my estate?

When you sell your home or no longer use it for your primary residence, you or your estate must repay the lender for the cash received from the reverse mortgage, plus interest and service fees. Any remaining equity belongs to you or your heirs. It's important to remember that you can never owe more than the home's appraised value when it is sold. None of your other assets will be affected by your reverse mortgage loan.

+ Must the heir or the last surviving borrower sell the property to repay the reverse mortgage loan?

No. Repayment may be accomplished by refinancing the reverse mortgage with a traditional "forward" mortgage loan, or through the use of other assets.

+ What are the costs and fees incurred when obtaining a reverse mortgage?

Some reverse mortgages have an origination fee, typical closing costs, upfront and recurring Mortgage Insurance Premiums and a monthly servicing fee. In most cases these charges can be paid from the reverse mortgage itself, making them no immediate burden to the borrowers; the costs are added to the principal and paid at the end, when the loan becomes due. However, there are now reverse mortgage products that charge greatly reduced fees including no upfront or recurring Mortgage Insurance Premiums and/or no origination fees and in some cases no closing costs at all, with the exception of the counselling fee and any state specific fees which can be quite nominal.

+ How much cash will I have to come up with upfront to cover origination fees and other closing costs?

One of the major benefits of a reverse mortgage is that you can use the money you obtain from your home's equity (dependent upon final calculations) to pay for the various fees (which can vary from almost none to quite a few depending on the final product). The costs are simply added to your loan balance. You pay them back, plus interest, when the loan becomes due - that is, when the last surviving borrower permanently moves out of the home or passes away.

+ Are reverse mortgage interest rates fixed or variable?

Reverse mortgages can either be fixed or have a variable rate that is tied to a financial index that will vary according to market conditions.

+ What is "TALC" and why should I know about it?

TALC is short for "Total Annual Loan Cost." It combines all of the costs of a reverse mortgage into a single annual average rate. It can be very useful when comparing one type of reverse mortgage to another. Reverse mortgages vary considerably in features, benefits, and costs. It's not really an "apples to apples" comparison. If you are considering a reverse mortgage, be sure to ask your All California Reverse Mortgage specialist or counselor to explain the TALC rates for the various reverse mortgage products.

+ Are there tax consequences? What about my Social Security and Medicare benefits?

Because reverse mortgages are considered loan advances and not income, the IRS considers the proceeds received by them to be non-taxable. Similarly, having a reverse mortgage should not affect your Social Security or Medicare benefits. Please contact your tax advisor to assess your particular situation. If you receive SSI, Medicaid, or other public assistance, your reverse mortgage loan advances are only counted as "liquid assets" if you keep them in an account past the end of the calendar month in which you receive them. You must be careful not to let your total liquid assets become greater than these programs allow. You should discuss the impact of a reverse mortgage on federal, state or local assistance programs with a professional advisor, such as your local Area Agency on Aging, your accountant or tax attorney. Finally, another tax fact to bear in mind is that the interest on reverse mortgages is not deductible on your income tax returns until the loan is paid off entirely…in other words until the interest is actually “paid”.

+ Is it true that I must meet with an unbiased counselor before completing my reverse mortgage application?

Yes. This is a federally mandated feature of the reverse mortgage process and is designed for your protection. Your All California Mortgage Reverse Mortgage specialist will advise you on how to get in contact with an independent government approved counselor.

+ Is it possible to purchase a home with a Reverse Mortgage?

Yes, most definitely, however it must be your primary residence. Eligible property types include: single family homes, 1-4 Unit properties, some manufactured homes, condominiums and townhouses. Newly constructed properties must have a certificate of occupancy before a loan application can be taken. For more specific information, please contact your local All California Reverse Mortgage Specialist.