The following Colorado reverse mortgage FAQs (“frequently asked questions”) are provided so you or members of your family can gather the real facts about reverse mortgages. These questions are typically asked by seniors like you needing the real facts about reverse mortgages.
- What are the age qualifications for a reverse mortgage?
- Reverse Mortgages are for homeowners at least 62 years of age with equity in their home.
- Is it possible to get a Colorado reverse mortgage if there is already an existing mortgage on the home?
- Yes, but any existing mortgage must be paid off when the reverse mortgage closes. The funds from the reverse mortgage can be used for that purpose.
- Does a home in a “living trust” qualify for a reverse mortgage?
- In most cases, the answer is yes. As a part of the loan process, you will need to provide a copy of the trust or a Certification of Trust for review by the lender and Title Company.
- Does a home in foreclosure qualify for a reverse mortgage?
- In most cases, the answer is yes. There must be enough equity in the home to pay off the balance of the existing loan including any late fees, attorney fees or any other fees connected to the foreclosure.
- Is there any tax liability for the reverse mortgage proceeds?
- No. Funds received from a reverse mortgage are generally categorized as loan advances and not taxable income. Consult your tax advisor for more information.
- Can the interest charged on loan principal be deducted for tax purposes?
- The interest that accrues on your loan is generally deductible when the loan is repaid, which occurs when the last borrower permanently leaves the property. Consult your tax advisor for more information.
- How do proceeds from a reverse mortgage affect Social Security, Medicare or pension benefits?
- The benefit from a reverse mortgage typically does not affect these benefits. Consult your financial advisor or local senior agency for more information.
- Will a reverse mortgage affect SSOI or Medicaid benefits?
- Generally a reverse mortgage will not affect these or most other means-tested benefits. Borrowers receiving Medicaid or SSOI may not be affected if the funds from the reverse mortgage are spent in the month received. Programs do vary by state, so we strongly encourage you to confirm with your local senior services agency that your benefits will not be affected.
- Are there income and credit qualifications?
- Some lenders may require a borrower to qualify using basic income and credit information.
- What are the costs associated with a reverse mortgage?
- With a reverse mortgage program, you will pay an origination fee, a mortgage insurance fee and actual closing costs, including charges by the title and/or escrow companies. Most of these costs can be financed as part of the initial loan advance. You will also receive disclosures of these costs as part of the loan process. It is customary for the lender to collect a deposit for the appraisal at the time of application. This is the only lender fee you will be required to pay out of pocket.
- What is the amount owed when repayment is due?
- You must repay the money that you have received plus accumulated interest and service fees (when applicable) up to the appraised market value of the home. The repayment is generally due within 6 months of the maturity event.
- Can I owe more than my home is worth?
- A reverse mortgage is a “non-recourse” loan, which means that you, your heirs or your estate cannot be required to repay more than the appraised market value of the home at the maturity of the loan. If the loan balance exceeds the value of the home, you, your heirs or your estate will only be obligated to repay an amount up to the current appraised value of the property.
- Does the lender take the title of the home?
- No. A reverse mortgage is only a lien against the property; therefore, the title will stay in your name.
- If there are no monthly payments, am I responsible for any other expenses related to the home?
- You are required to pay your property taxes, homeowners and flood (if required) insurance premiums and other expenses necessary to maintain the home.
- When does the loan need to be repaid?
- There is no repayment as long as the homeowner owns and maintains the home as their primary residence and does not permanently leave the home.
- Will my heirs have to sell the property to repay the loan?
- No, the loan can be repaid by refinancing the existing reverse mortgage with a standard mortgage loan.
- How will a reverse mortgage affect the future sale of the home?
- The impact of a reverse mortgage is no different than that of a purchase or refinance mortgage. Repayment of the mortgage is due upon sale of the home.
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