Frequently Asked Questions

What is a Reverse Mortgage? & Other Frequently Asked Questions

Everyone who approaches the subject of reverse mortgage will have questions. In fact, questions that result in reliable answers are a crucial part of the process. While there will be ample time to answer questions when you meet with a reverse mortgage loan officer, here are some of the questions that come up most frequently.

Frequently Asked Questions

What is a Reverse Mortgage?

A reverse mortgage is a home loan, but it is a special type of loan that allows the homeowner to get cash based on the equity in their home. What separates this type of loan from the common home equity loan is this: You do not have to repay the money until the home is sold or the borrower no longer lives there, assuming that other qualifications are met including that the borrow continues to pay all taxes, HOA fees, and regular maintenance expenses for the property.

What are the Three Main Reverse Mortgage Qualifications I Have Heard About?

These three qualifications come up whenever someone asks, “What is a reverse mortgage?” They are:

  • The borrower must be 62 or older (while applicants must be 62 or older, as long as one spouse meets this qualification the other can be younger than 62 and still qualify).
  • The borrower must own the home.
  • The home is the primary residence.

If I Outlive the Loan, Can I Lose My Home?

This is definitely one of the most frequently asked questions when it comes to reverse mortgage loans. There are two key elements to this answer: (1) The lender cannot take the home as long as one of the borrowers continues to live there as their primary residence and keeps the taxes and insurance up to date. (2) You will not pay more than the value of the home. The lender has no power to force you from the home and cannot make you sell – unless there are specific terms in the loan agreement that you do not hold to.

Can I Leave the Property to Heirs?

When the home is no longer used as your residence, the amount of the HECM reverse mortgage loan must be repaid. However, you (or your heirs) are not forced to sell the home, and you (or your heirs) can use other funds to repay the loan if they are available. If you choose, the lender can take the title of the home as reverse mortgage repayment. The amount due cannot exceed the value of the home, and no other assets will be affected.

How Much Can I Receive from a Reverse Mortgage?

The answer to this question varies with each property, of course, but in most situations, there are just a few factors to determine the amount you can get from a reverse mortgage. The factors include:

How Does the Lender Get the Money to Me?

When it comes to actually getting the funds, there are several options.

  • You can receive a partial or full lump sum
  • You can get monthly payments for a set amount of time
  • You can get a reverse mortgage line of credit
  • Or you can choose a combination of the above

Will a Reverse Mortgage Change my Pension or Social Security?

This another common myths about this type of loan. The benefits of a pension, Medicare, and Social Security will not be affected. In fact, a reverse mortgage loan may actually improve the financial picture, due to the extra money added to retirement income. Therefore, wise use of a reverse mortgage may even allow you to hold off on starting Social Security income.

The only benefits that may be affected with a reverse mortgage include income-based benefits such as Medicaid.

Learn More About California Reverse Mortgages

These are just some of the basics. If you would like to learn more about reverse mortgage requirements and if a reverse mortgage is right for you, we invite you to contact us today.

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These materials are not from HUD or FHA and were not approved by HUD or a government agency.