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Reverse Mortgage Q&A


Who is eligible for a reverse mortgage?

Eligible homeowners are those who are at least 62 years of age, and have adequate equity in their homes.

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I currently have a forward mortgage on my home, can I take out a reverse mortgage?

Yes. However, the existing mortgage(s) must be paid off at the time of closing. You may use a portion  the proceeds from the reverse mortgage to do that.

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Are there any types of homes that don't qualify for a reverse mortgage?

Yes. The following types of homes do NOT qualify: vacation homes, secondary homes, mobile and manufactured homes which are not fixed to a permanent foundation, rental properties which encompass more than 4 units, and homes on leased lands.

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What is my tax burden from the proceeds of a reverse mortgage?

At this time, the IRS does not regard the proceeds of a reverse mortgage as taxable income. However, confer with your tax advisor as each individual's situation differs.

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How will the cash advanced affect my other retirement benefits; Social Security, Medicare or my pension?

The cash advanced to you will not affect these benefits. However, confer with your tax advisor as each individual's situation differs.

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Will the reverse mortgage change my SSI or Medicaid eligibility?

No. These benefits will not be affected by the proceeds of a reverse mortgage as long as the monthly cash advances are completely spent and not accumulated. These rules do vary state to state, so check with the local Area Agency on Aging, and also confer with your tax advisor.

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How much is due at the end of the loan?

The cash advances that have been received and accumulated interest.

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Is the interest on my loan principal tax deductible?

The interest accrues and is tax deductible when the loan balance and interest is repaid, when the borrower permanently leaves the property. Confer with your tax advisor as each individual's situation differs.

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What happens if my home is worth less than the amount I owe?

A reverse mortgage is a "non-recourse" loan. The borrower can never owe more than the value of the home, regardless of the loan balance.

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Can the lender take the house?

This is a MYTH! Because a reverse mortgage is just a loan against the property, the title remains in the name of the borrower and the lender is only repaid the loan balance or the home value, which ever is less.

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My home is in a living trust, can I take out a reverse mortgage?

The answer is usually yes, subject to review of the trust documents.

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What are my responsibilities?

You must pay your property taxes, maintain the home, retain property insurance, and notify the lender if you will be away from the property for an extended period of time.

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Are there upfront costs?

Yes. You will be responsible for an origination fee and actual closing costs, including fees from the title and escrow companies. These amounts can be financed as part of the loan.

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When does the loan become due and payable?

The loan is due and payable when the borrower sells the property, permanently leaves the home, or dies. In the case of a couple, repayment is activated when the second moves out or dies.

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Does the house have to be sold to repay the loan?

No. Refinancing by means of a conventional mortgage loan can be used to satisfy the reverse mortgage loan.

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Wisconsin Reverse Mortgage Loan Officer