Connecticut Reverse Mortgage - Common Questions

Common Questions:

What is a reverse mortgage or senior citizen mortgage?
- A Reverse Mortgage is a loan that enables a "senior" homeowner, having attained the age of 62 or older, to convert part of the equity in their home to tax free income without having to give up title or take on a monthly payment.

How do I qualify for a reverse mortgage?
- You must be at least 62 years of age, own, and have equity in your home and it must be your primary residence. There are no income, credit or health requirements to qualify.

What if I already have a mortgage or other debt on my home?
- The mortgage and or debt will be paid off from the proceeds of the Reverse Mortgage loan. Your Reverse Mortgage will then be based upon the remaining equity in your home.

How will the income from the Reverse Mortgage affect my taxes, social security or other benefits?
- Proceeds from a Reverse Mortgage are not taxable, it's your money (equity), not taxable income. Nor will your regular Social Security or Medicare be affected. The impact, if any, on other federal, state or local assistance programs should be discussed with your financial advisor or the program sponsor.

How much money can I borrow?
- This depends upon borrower's age, market value and equity in the home and the interest rate at the time of origination.

Are there payment options?
- Yes. You can choose to receive fixed monthly payments for as long as the home is your primary residence or, a lump sum payment, a line of credit or any combination of the above.

THE REVERSE MORTGAGE AS AN ESTATE PLANNING TOOL

Can a Living Trust or other form of trust take out a Reverse Mortgage?
- Yes, but subject to the conditions of the trust document. The entire trust document must be made available to the lender in order to approve the Reverse Mortgage loan and in a manner that maintains the integrity of the trust.

Will any other part of the homeowner's estate be responsible for the Reverse Mortgage debt?
- No. The Reverse Mortgage loan is non-recourse even if the equity is less than the amount due.

Can the accrued interest be used to benefit the estate?
- Yes. In many instances this may be the case but you should consult with your legal or tax advisor regarding these or other tax implications.

Are the proceeds of the Reverse Mortgage tax free, even if taken as one lump sum?
- Yes. But please consult with your financial advisor.

Can the proceeds be used as a retirement or estate planning tool to purchase annuities, life insurance, prepaid health insurance, etc. or any combination thereof?
- Yes. The use of the proceeds is at the discretion of the borrower and/or the direction of the borrower's financial or legal advisors. The use of the proceeds of the Reverse Mortgage is limited to the creativity and needs of the borrower.

General Comments.
- The Reverse Mortgage may be used to provide funding for healthcare or medical treatment.
- It may reduce the impact of estate taxes through the purchase of various other insurance products.
- It may maximize the legacy of estate transfer.
- It may lower the total estate value subject to taxes.
- It may create estate deductions thereby enhancing the net value of the estate.
- It could provide an added element of control to the estate plan.
- The proceeds of the Reverse Mortgage are tax free. (Consult your financial advisor or tax attorney).

COSTS ASSOCIATED WITH THE REVERSE MORTGAGE

How much will it cost to get a Reverse Mortgage loan?
- Many of the same costs of a home purchase mortgage apply to the Reverse Mortgage. The charges will include an appraisal fee, termite inspection, origination fee, mortgage insurance fee (for FHA/HUD Home Equity Conversion Mortgages (HEMC), monthly servicing fee and other standard recording or closing costs. In most instances these fees are capped, financed as part of the Reverse Mortgage and taken out of the loan proceeds at the closing.
- An appraisal fee may be charged at the time of the application process.
- There is no application fee.
- There are no "points" to the borrower.
- There is no processing fee.
- No "junk" fees