Reverse Mortgages in Fairfax – What You Need to Know

May 9, 2011

This post is brought to you courtesy of: Christian Steiner, Home Instead Senior Care, Manhattan

Many seniors need a way to finance their long term care. Reverse mortgages became popular years ago, then they dried up and now we hear about them again. We decided to publish a little guide for those who may know of a senior who may be considering this as a vehicle to help finance his/ her long term care.

What is a reverse mortgage?

A reverse mortgage is a loan for senior homeowners that uses a portion of the home’s equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not personally liable if the home sells for less than the balance of the reverse mortgage.

Eligibility for a reverse mortgage (HECM)

To be eligible for a HECM reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. The home must be owned free and clear or all existing liens but be able to be satisfied with the reverse mortgage. If there is a mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at the closing. Generally there are no income or credit score requirements for a reverse mortgage.

Eligible home types

Almost all home types are eligible. However, mobile homes must have been built in the last 30 years, the land must be owned, it must be on a permanent foundation, and it must meet an FHA inspection. Some condos and townhomes may be eligible as well.

Difference between a reverse mortgage and a home equity loan

Generally a home equity loan, a second mortgage, or a home equity line of credit (HELOC) have strict requirements for income and creditworthiness. Also, with other traditional loans the homeowner must still make monthly payments to repay the loans. A reverse mortgage has no income or credit score requirements and instead of making monthly payments to the lender, the homeowner receives from the lender. With a reverse mortgage the amount that can be borrowed is determined by an FHA formula that considers age, the current interest rate, and the appraised value of the home. The more valuable the home (up to a certain point), the higher the loan amount will be, depending on lending limits. As stated previously, with traditional loans the homeowner is still required to make monthly payments, but with a reverse mortgage the loan is typically not due as long as the homeowner lives in the home. With a reverse mortgage no monthly payments are due, however the homeowner is still responsible for real estate taxes, insurance, and maintenance.

Outliving the reverse mortgage

A reverse mortgage can not be outlived. As long as at least one homeowner lives in the home as their primary residence and maintains the home in accordance with FHA requirements (keeping taxes and insurance current) the loan does will not become due.

Estate inheritance

In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage or put the home up for sale. If the equity in the home is higher than the balance of the loan, the remaining equity belongs to the estate. If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA.No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage. Loan limit The amount that is available generally depends on four factors: age (older is better), current interest rate, appraised value of the home and government imposed lending limits. Use the calculator to estimate how much could be drawn. Distribution of money from a reverse mortgage There are several ways to receive the proceeds from a reverse mortgage.

  • Lump sum – a lump sum of cash at closing.
  • Tenure – equal monthly payments as long as the homeowner lives in the home.
  • Term – equal monthly payments for a fixed number of years.
  • Line of Credit – draw any amount at any time until the line of credit is exhausted.
  • Any combination of those listed above


These loans come with onerous expenses, but they do have some redeeming value. Read about the pros and cons, and check out the resources provided below.
The upsides of reverse mortgages

You can choose how to receive the money: fixed monthly payment, lump sum, line of credit or some combination of these options.
Income from reverse mortgage generally does not affect Social Security or Medicare benefits.
If you “outlive the loan,” meaning you receive more in payments than your home is worth, you will never owe more than the value of the home, according to the Federal Trade Commission, or FTC.
Loan advances are generally not taxable.
Most loans do not have income requirements.
Homeowner retains title to home.
No payments are due until last surviving borrower dies, sells home or no longer lives in home as primary residence.
HECM programs allow borrower to live in nursing home or other medical facility for up to 12 months before loan becomes due.
After the home is sold and the loan and fees are paid to the lender, any remaining equity in the home belongs to you or your heirs.
The downsides of reverse mortgages

Reverse mortgage proceeds could impact Medicaid eligibility.
Borrowers must be at least 62 years old to qualify.
Lenders generally charge origination fees and other closing costs that are usually steep.
Lenders require free debt counseling prior to loan application.
Lenders may charge servicing fees during term of the mortgage.
Debt increases over time as interest is charged to outstanding balance of loan.
Most loans have variable interest rates tied to short-term indexes, such as the one-year Treasury bill or LIBOR.
As home equity is used up, fewer assets are available to leave to heirs.
Interest is not tax deductible until the loan is paid off.
Borrowers are responsible for paying taxes, homeowners insurance, maintenance costs and other expenses. If they don’t, the loan may become due.
Do your homework

Determine what type of reverse mortgage you might need.  Do you need a one-time payment to help pay for home improvements or property taxes? Consider a single-purpose reverse mortgage. Call the Area Agencies on Aging to explore this option at 1-800-677-1116. Ask for information about loan programs for home repairs or improvements or for property tax postponement. To find an agency near you, visit Do you need money for another purpose altogether? Do as much homework as possible before contacting an HECM or proprietary lender. Below are some links that provide further information:

This post is brought to you courtesy of: Christian Steiner, Home Instead Senior Care, Manhattan. Have any comments? As always, please share them with us below or on our Caregiver Forum.

Jason Sager, Owner Home Instead Senior Care Fairfax, Virginia

We hope this was helpful. If you have any questions or if you know of a senior who could benefit from our vast array of home care services in the Fairfax area , please call us at 703.750.6644, or email us. We accept most long term care insurance as payment and have a full time staff of trained and certified home care personnel covering the Fairfax County, Virginia area.

Alisa Meredith, Writer

Guest writer Alisa Meredith is a blogger and social media professional with Scalable Social Media. Every once in a while, someone at Home Instead does something that compels her to stop Tweeting and write something real! This is one of those times.

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