Reverse Mortgage Loan Blog

Mark Seegmiller is a reverse-mortgage loan specialist with Mountain America Credit Union, Woods Cross Branch. He says the majority of reverse mortgages help pay health-care costs and are used for home repairs, and living expenses, and to repay existing mortgages.

Explain a reverse mortgage.

The formal term is Home Equity Conversion Mortgage (HECM). Reverse mortgages allow people who are at least 62 years old and who have equity in their homes to turn that equity into cash. Basically, you unlock equity in your home that you don’t have to pay back as long as you live there. The tax-free money from a reverse mortgage can be received as a lump sum, regular monthly payments, a line of credit or in any combination of these three options. There are very little out-of-pocket expenses, and most costs can be included in the loan. You, or your estate, pay the money back – plus interest – when you pass away, sell your home or permanently move out of your house. This government-backed program is supplementing seniors’ retirement incomes across the nation.

How safe are reverse mortgages?

They are very safe because the Federal Housing Authority, along with other lender institutions, are ultimately the ones that insure the loan.

The borrowers need only to maintain property taxes, homeowners insurance and the upkeep of the property.

What are the interest rates for reverse mortgages and when does the money become due?

With a reverse mortgage, you have a choice of two applied interest rates (depending on the availability of the lender) – an annual adjusting rate or a monthly adjusting rate. Each interest rate does have a cap. The interest applied to the loan does not need to be paid back until the home is sold. There is also a fixed-rate reverse mortgage loan; however, it is higher than the variable-interest rate loan (6 percent versus 5 percent).

Explain the newest reverse mortgage, LIBOR 65.

Normally the reverse-mortgage interest rate is tied to the one-year U.S. Treasury Security Rate, but now the borrower can choose to have a reverse-mortgage interest rate tied to the LIBOR index. This product, to be referred to as an HECM Monthly LIBOR 65, joins the existing lines of HECM loans. It has the same features of a HECM loan, only it has a different index (tied to global rates) indicating the interest rate.

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