Common Questions About The Reverse Mortgage

Issue 48.13

Over the past several years HUD has made great strides to strengthen the structure of the HECM loan to enable stability toward longevity. Although the changes made the product more stable, each modification created concern with the validity and benefit of the product. Listed below are actual questions or scenarios presented by Senior clients and the answers or outcomes of the scenario as it may be.

Q: What is the required down payment for the current HECM rules?
A: The down payment for the purchase of a home using the HECM is based on the age of the younger borrower. The base level down payment for the entry level client (62 years old) is approximately 50%. This amount includes most of the costs and fees for the loan as well. For a client 75 years of age the percentage drops to around 44% down. This number may vary as interest rate options may be available which would alter the outcome.

Q: Can the down payment money be borrowed or drawn from a current Home equity line of credit from another home?
A: all monies used for down payments must be considered seasoned funds. 60 day bank statements will be used to verify funds. Large deposits into accounts are only allowed by qualified sources not loans or gifts. Sale of personal property or real estate would be considered allowable. So, funds coming from other areas must be deposited into accounts a minimum of 60 days prior to application for HECM

Q: What if one of the married couple is not yet 62 years old?
A: unfortunately both parties must be 62 or older under new guideline. Some exceptions may be granted but as a general rule both parties must be eligible for the loan to qualify.

Q: Can A borrower sell the home without penalty after obtaining a HECM?
A: Yes, there is no penalty for selling the home at any time. In fact, there is no recourse if the balance of the loan has exceeded the value of the home. The home may be sold for less than owed (short sell) and no penalty will be assessed either monetary nor credit. 

Since the recent changes in guidelines were significant, many other questions are likely lingering and unanswered.

For more information regarding any details of the changes, contact Scott Gibson 435-767-1092.

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