Reverse Mortgages - Frequently Asked Questions:

How does a Reverse Mortgage differ from a home equity loan?
While both Reverse Mortgages and home equity loans enable you to turn the equity in your home into spendable dollars, there are important differences. With a home equity loan, you must make regular monthly payments to repay the loan. These payments begin as soon as the loan is originated. To qualify for such a loan, you must have a monthly income great enough to make those payments. A Reverse Mortgage has two principal differences from the typical home equity loan:

You do not repay the loan as long as the home remains your principal residence.

Your income is not considered when qualifying you for the loan.

Who is eligible for a Reverse Mortgage?
You, and any co-borrowers, must be at least 62 years old and either own your home free and clear or have a very low outstanding mortgage balance. You also must agree to attend a consumer education session on Reverse Mortgages. Family members are strongly encouraged to attend these sessions with you.

How much money can I borrower with a Reverse Mortgage?
The maximum amount you can borrow - the principal limit - is based on a combination of factors depending on the type of Reverse Mortgage you select. These factors include: the age of the youngest borrower, the number of borrowers, the adjusted property value of your home, the interest rate to be charged and the maximum claim amount for your area.

Will I have to pay any fees to obtain a Reverse Mortgage?
Yes, you will pay an origination fee and other closing costs and a monthly servicing fee. You can finance almost all of these fees -- that is, these items may be included in your loan balance so that you do not have to pay cash for them.

How will I receive my money?
When you close your loan, you will select one of the following payment plans:

• Tenure option - you receive equal monthly payments for as long as you occupy the home as your principal residence
• Modified tenure option - you may set aside a portion of loan proceeds as a line of credit and receive the rest in the form of equal monthly payments
• Line of credit option - you draw upon the principal limit of cash available at times and in amounts of your choosing

How is interest charged for a Reverse Mortgage?
The Reverse Mortgage is an adjustable-rate mortgage and the interest rate will change periodically based on the terms of the mortgage note. A change in the adjustable rate has no effect on the amount or number of loan advances you receive. Interest rate changes will cause the loan balance to grow faster with a higher rate or slower with a lower rate.

Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?
No. As long as you continue to occupy the property as your principal residence and abide by the loan agreement, which states that you are responsible for property maintenance and payment of all property taxes and insurance, you can stay in your home as long as you choose. No deficiency judgment may result from your Reverse Mortgage.

Will my heirs owe anything to the mortgage lender if I die before the loan is paid off?
Upon your death, the loan balance, consisting of payments made to you or on your behalf (such as fees) plus accrued interest becomes due and payable. Your heirs may repay the loan by selling the home or by paying off the Reverse Mortgage loan so that they may keep the home. If the loan balance exceeds the value of your property, your estate will owe no more than the value of the property. No additional financial claims may be made against your heirs or estate.

If my home appreciates in value while I have a Reverse Mortgage, who will be entitled to that money?
With a Reverse Mortgage, you are legally required to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs. What if I decide to sell my home? If you choose to sell your home, the outstanding loan balance becomes due and payable to the mortgage lender at the time of sale. You would receive any proceeds exceeding the loan balance.

Can I sell my home to my children and continue to live in it?
If you sell your home to your children, or any other individual, the Reverse Mortgage loan will be due and payable at settlement. After the loan is repaid, occupancy arrangements are at the discretion of the new owners.

Will funds I receive from a Reverse Mortgage affect my Social Security, Medicare, Supplemental Security Income (SSI), or Medicaid benefits?
Reverse Mortgage loan funds do not affect your Social Security or Medicare benefits because those benefits are not based on the assets of the recipient. However, in the federal Supplemental Security Income program, beneficiaries must keep their liquid resources under certain limits ($2,000 for individuals and $3,000 for couples). If you do not spend Reverse Mortgage advances in the month received, then such funds are considered part of your liquid resources and may adversely affect your eligibility for SSI. Therefore, a Reverse Mortgage borrower who also receives SSI should never draw more money than he or she actually needs to spend that month. Regulations for state-administered programs such as Medicaid, AFDC, and food stamps and for state-funded welfare programs (such as state supplements to SSI), all have different eligibility requirements. Therefore, we suggest that you consult a benefits specialist at your local Area Agency on Aging or the local offices for these programs to determine how Reverse Mortgage payments may affect your particular situation.