Preparing for Your Counseling Session
The decision to get a reverse mortgage is an important one. The Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) want to ensure you are able to make an informed decision and that you are able to choose a course of action that meet your needs. For this reason, housing counseling for HUD’s (HECM) is required. The purpose of this overview is to provide introductory information on counseling and the HECM program, to help you prepare for your counseling session. After your counseling session, you have a better understanding of the features of a reverse mortgage; the impact a reverse mortgage have on your particular circumstances; and whether services or programs other than a reverse mortgage might better meet your needs.
What You Can Expect from Your Reverse Mortgage Counselor
Understanding what to expect from reverse mortgage counselors is an important first step in setting your expectations for your counseling session. Remember, only you can decide if a reverse mortgage is right for your situation. The counselor provides information to assist you in making that decision.
- The counselor is responsible for helping you understand reverse mortgages and the appropriateness of a reverse mortgage to meet your particular need as well as alternatives to a reverse mortgage.
- Reverse mortgage counselors discuss your financial and other needs for remaining in your , the features of a reverse mortgage and how it works, your responsibilities with a reverse mortgage, the impact of a reverse mortgage on you and your heirs, and the availability of other assistance you may need.
- The job of the counselor is not to “steer” or direct you towards a specific solution, a specific product, or a specific .
- Counselors help you understand your options and their impacts.
Reverse mortgage counselors are required to follow specific practices, which are designed to ensure you receive quality counseling services and are protected against fraud and abuse. HUD requires that HECM counselors do the following:
- Send you required materials( i.e., this packet) prior to you counseling session,
- Follow established protocols when conducting the counseling session, and
- Follow-up with you after the session has concluded.
What You Can Expect from the Reverse Mortgage Counseling Process
- Schedule an
The counseling process begins when you schedule your for a counseling session. You must schedule an directly with the counseling . Your cannot initiate or participate in the counseling session. This session is conducted in person or over the telephone; however, HUD advises that, if possible, you meet with your counselor face-to-face to gain greater benefit from your session.
Once you have set up an , the sends you a packet of information so that you can prepare for your session. Before you begin, you should also know that some agencies charge a fee for counseling; if you cannot afford to pay this fee you should discuss your inability to pay with the at the outset of your session to understand your options.
contact you and send information:
- The counselor
Your name, contact and other key information, including your interest in obtaining a reverse mortgage, for the counseling session.
collect from you:
- Counseling session:
The counselor discuss with you your needs and circumstances; provide information about reverse mortgages and other alternative types and sources of assistance that might be available to you.
- Certificate of Completion:
Once you complete your session and you and your counselor are comfortable that you understand the essentials of a reverse mortgage, the counselor issue a certificate, which verifies for a that you have successfully completed counseling.
Your counselors follow-up with you to learn if you need further assistance and to understand the outcome of your counseling session. You may also call your counselor to seek further assistance after your session.
How a Reverse Mortgage Works
Before you begin your counseling session, it is helpful if you understand a few basics about a reverse mortgage.
Reverse mortgages enable homeowners62 or older to convert their ’s into available cash – a advances you money (the ) based upon the in your . The amount of money you are eligible to receive generally depends upon the amount of in your and your at the time you get the .
With a reverse mortgage, you remain the owner of your. As with any , you must continue to pay taxes and homeowner’s insurance. You are also responsible for maintaining your in good condition.
You HECM in full when the last surviving borrower dies or sells the . You can choose to pay off the through the sale of the or prepayment of the at any time without penalty. Your estate may retain ownership of the and must pay off the in full or the can be sold to an unrelated party for the lesser of the unpaid mortgage balance or 95% of appraised value.not have to repay your balance for as long as you live in your . You must repay a
Types of Reverse Mortgages
There are three types of reverse mortgages shown in the chart below.
Proprietary reverse mortgage can be used for any purpose and may be suitable for borrowers with high cost Options. There are several types of HECM available, including monthly and annually adjusting interest rate as well as fixed interest rate . Borrowers can decide to take a line of credit with flexible draw down options, a term with fixed monthly for a specified number of years, or a tenure with guaranteed for life or a combination of these options.
Choosing a Reverse Mortgage to Meet your Needs
HECMare flexible. The best for you depend on your current and financial and circumstances. For example:
- If you have a small balance on your existing mortgage and would like to line of credit would allow you to draw all the funds at closing and off the current mortgage; it off with the reverse mortgage , a
- If you need a set amount of money every month to supplement your income to help meet monthly expenses , then a tenure or term might be a suitable option for you.
- If you know you line of credit may also meet your . have some large health care expenses in the near and want to have the funds available when needed , a
Your reverse mortgage counselor HECM) can be used for any purpose and is insured by the Federal government.discuss your goals for a reverse mortgage with you and explain the different options available to help meet your . Single purpose reverse mortgage typically offered by state and local government agencies to be used in only one specific way, for example, home repairs. Home Equity Conversion Mortgage (
Costs to Obtain HECM
Costs associated with HECMs are generally higher than those for “forward” mortgages used to purchase a home. Although, the cost categories are the same as you would see for a traditional “forward” mortgage. These costs include FHA mortgage insurance.fees to originate the mortgage, servicing fees for ongoing administration of the and interest on the money you use from the . There are also closing costs, which include all the usual and customary expenses associated with obtaining a mortgage, for example, the appraisal, title searches and insurance. HECMs also include a fee for
Impact on Tax/Social Service Benefits
Reverse mortgage HECM payments.advances are not taxable and do not affect Social Security or Medicare benefits. However, you must be careful that any proceeds you retain do not exceed the monthly liquid resource limits for Supplemental Security Income (SSI) and Medicaid, which may be impacted by your
Alternatives to a Reverse Mortgage
Your HECM counselor will also help you consider options available to meet your needs other than a reverse mortgage. These options include:
- selling your home and moving to a more suitable residence
- renting as well as other financial options, and
- support services and public benefits that may be available to you in your community.
HUD encourages you to learn as much as possible about your options, before you decide on a reverse mortgage.
Below are resources you can access to learn more about reverse mortgages and elder care:
AARP’s web site at www.aarp.org/money/revmort provides more information on reverse mortgages and calculators that provide general estimates of the amount of money you might receive from a reverse mortgage. You may also contact AARP at 1-800-424-3410.
The National Reverse Mortgage Association provides consumer information at www.reversemortgage.org/default.aspx and can also be reached by calling 1-866-264-4466.