Securing a Indiana Reverse Mortgage

A reverse mortgage in Indiana allows senior homeowners in the state to borrow money against the equity of their homes in order to pay for daily living expenses and other costs. These mortgages are readily available and provide many benefits to seniors who qualify.

What is a reverse mortgage?

In a reverse mortgage, your lender takes ownership of your home equity, whatever the amount may be, and makes payments out of that equity to you as long as it lasts.

How can reverse mortgage funds be used?

You can spend this money on anything you need or want.  Most seniors put this income toward medical bills, senior living, and day to day expenses, but you can also use it to pay for a luxurious vacation or to make a down payment on a new home.

What types of reverse mortgages exist?

Reverse mortgages have three forms:

• Goverment-insured: FHA HECM (Home Equity Conversion Mortgage).
• Single-purpose: backed by nonprofits or state or local government agencies. 
• Proprietary: backed by private entities.

The most common source is the FHA HECM reverse mortgage, which is insured by the Department of Housing and Urban Development (HUD). This article will focus on HECM reverse mortgages.

Who can get a reverse mortgage?

Homeowners aged 62 and older who own their home outright and have most of their mortgage paid off. If the current mortgage is not paid off, the initial reverse funds or some combination with out-of-pocket cash must be used to deplete the remaining balance. Credit score is not a qualifying factor. 

What costs are associated with a reverse mortgage?

There are several costs associated with securing an HECM reverse mortgage in Indiana, including but not limited to:

• Upfront fees: include the lender's fees, and can be paid from the reverse mortgage funds. This means, however, that the money taken cannot be borrowed back. So a $200,000 reverse mortgage with $16,000 in fees paid via the reverse mortgage funds will leave the homeowner with $184,000. 
• Closing fees: include all the same fees required of a traditional mortgage closing. 
• Reverse mortgage counseling fees: HUD mandates all reverse mortgage homeowners attend reverse mortgage counseling. Fees are in the $100 range but can be waived for lower income seniors. 
• Mortgage insurance: an upfront mortgage insurance premium (MIP) must be paid for reverse mortgage borrowers. It can be as low as 0.5% and as high as 2.5% of the appraised home value, unless the home is over $625,500, in which case the upfront mortgage insurance is calculated by the lender. 

How will I receive my funds?

You can select one of several different payment arrangements that lenders offer:

• You can get the money as you need it through a credit line.
• You can get an established amount of money each month, as income.
• You can receive the money all at once as a lump sum.

If none of these methods suits your financial needs and goals, you can arrange a custom payment plan with your lender to get the money you need when you need it.

Does the equity need to be repaid?

The equity need not be repaid until you move, sell, or pass away. Once you take out a reverse mortgage, your lender will own the equity of your home. The lender won’t own your home, which remains in your possession for the remainder of your life or until you move into a new home.

If you live in the home until you pass away, the responsibility of paying back the reverse mortgage will transfer to your heirs, who will also receive you home. Your heirs can then sell the home to pay back the debt. If you think your home may sell for less than the loan amount in coming years, don’t worry. The government has established laws that ensure lenders can’t collect more than the value of the home, even if the home value decreases.

Indiana Reverse Mortgage Lenders

No two lenders offer the same reverse mortgage terms and rates. Research as many lenders as you can to determine what you’ll need to pay in closing fees and what interest amounts will be deducted from your equity. You should work with the lender who offers the best terms and rates.

When you’re taking out a reverse mortgage, fees can add up quickly. You should find out from at least four or five lenders what fees they charge before you begin your application. For more information about getting started on your new loan, read our reverse mortgage checklist.

Indiana Senior Resources

The Indiana Family and Social Services Administration provides a number of aging resources on their website. Many, like transportation and meal assistance, enable seniors to continue living independently at home. These services are available statewide, including popular cities like Indianapolis, Terre Haute, Bloomington, and Evansville. 

Lenders in: Indiana.