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Commonly Asked Questions
Q. Can a
reverse mortgage be taken out if there is
already a conventional mortgage on the home?
A.
Yes, but existing mortgages must be paid off
at closing. The proceeds from the reverse
mortgage may be used for that purpose. This
eliminates a monthly mortgage payment.
 Q.
What about a home in a 'living trust'?
A.
A homeowner who has put the home in a living
trust can usually take out a reverse
mortgage, subject to review of the trust
documents.
Q. Will
I have any tax liability for the reverse
mortgage proceeds?
A.
Currently the Internal Revenue Service
treats monies received from a reverse
mortgage to be loan advances and not taxable
income (consult your tax advisor).
Q. Can
the interest charged on my loan principal be
deducted for tax purposes?
A.
The interest accrues and is deductible when
the loan balance and interest are paid after
the borrower permanently leaves the
property.
Q. What
are the upfront costs associated with a
reverse mortgage?
A.
The borrower will pay an origination fee and
actual closing costs, including charges by
the title and escrow companies, and an
insurance fee to HUD when applicable. All of
these costs can be financed as part of the
initial loan advance.
Q. What
is due when the loan is repaid?
A.
The borrower pays back the cash
advances they have received plus accumulated
interest and any fees/costs that were
financed.
Q. What
if I owe more than my home is worth?
A.
All reverse mortgages are "non-recourse"
loans, which means that the borrower can
never owe more than the value of the home
regardless of the loan balance.\
Q. Does
the lender take the house?
A.
This is a misconception. A reverse mortgage
is merely a loan lien against the property.
The title remains in the name of the
borrower and the lender is only repaid the
loan balance.
 Q.
When does the loan become due and payable?
A.
The loan is due and payable when the
borrower sells the property, permanently
leaves the home, or passes away. In the case
of a couple, it is the second to move out
or upon their death that triggers repayment.
Until these events take place, you live in
the home and make no payments to the lender.
Q. Do I
or my heirs have to sell the property to
repay the loan?
A.
No, repayment can be accomplished by
refinancing the existing reverse mortgage
with a conventional mortgage loan.
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