Once considered a course of last resort, Reverse Mortgages have become increasingly popular since the sub-prime ending bubble burst in 2008. Now more seniors than ever are considering a Reverse Mortgage and have many questions, including about how a title is affected in a Reverse Mortgage
What is a Reverse Mortgage?
Let’s begin with a definition: A Reverse Mortgage enables older homeowners to borrow against the equity in their homes without having to sell the home, give up title, or take on a new monthly mortgage payment. A Reverse Mortgage literally means the payment stream is reversed. Unlike in a regular mortgage, where you make
monthly payments to a lender, with a Reverse Mortgage, the lender makes payments to you.
Are you qualified?
You will quality for a Reverse Mortgage if you own a home, are at least 62 years old, and have enough equity in your home. There are no special income or medical requirements.
There are rules and regulations affecting the title and the mortgage on your property, however, and here are some of the most important ones for you to understand:
- All people listed on the title of your home must be 62 years old or older.
- If one spouse in not yet 62, their name must be removed from the title before qualifying for a Reverse Mortgage.
- When someone’s name is removed from the title, that person no longer is an owner of the home. When the remaining person on the title dies, the surviving spouse or heirs are still responsible for paying back the Reverse Mortgage loan, in whatever way they care to, including by sale of the home. The Reverse Mortgage will be paid first from the sale proceeds and whatever is left after that would
belong to the heirs.
- A Reverse Mortgage must be the only lien on a property. A title search by a reputable title company will detect if there are any other encumbrances on the title.
- You, as a Reverse Mortgage holder, are responsible for staying current on your homeowner’s insurance and real estate taxes. You risk being forced into default if you go into arrears and such unpaid insurance or tax payments go into the public record to be discovered during a title search. The title on such a property would show this encumbrance and
would need to be cleared before the property could be resold.
What are the fees?
Origination costs and fees at the start of the loan include the cost of a title and tax search to make certain the title is clean (the owner listed is the legal owner and the title has no encumbrances such as liens, outstanding tax bills or an unpaid mortgages). Other fees will be charged by the lender when the
loan is originated and during the life of the loan, as do other responsibilities and obligations on the part of the person receiving the Reverse Mortgage Title.
It is strongly urged that you consult an attorney before undertaking a Reverse Mortgage and visit such resource pages as the website of the National Reverse Mortgage Lender’s Association (NRML).