Securing a Kentucky Reverse Mortgage

If you’re a senior in Kentucky, a Kentucky reverse mortgage can help you secure the retirement income you need to live the best years of your life with success and financial independence.  You don’t need to be wealthy to qualify for this mortgage program.  You need to be 62 years of age and own a home.  That’s all.  If you have equity in your home, you can qualify.

What is a reverse mortgage?

Lenders pay the homeowner funds instead of the other way around. The money comes from your own home equity. Your lender takes control of your home equity and gives you money equal to the value of this amount minus fees and applicable mortgage rates. 

How can reverse mortgage funds be used?

The money you receive can be spent on any expense.  You can use it to pay off your current mortgage, to pay off other debts, to cover basic living necessities, or to take a luxurious vacation.

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 Kentucky, 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, and for how long?

When providing your money to you, your lender may follow one of the following payment arrangements. The arrangement used is up to you.

• Your lender may deliver the money all at once, as a lump sum, at the closing of the loan.
• Your lender may provide it in monthly installments, similar to Social Security payments.
• You may be able to access it as a credit line.
• Any combination of these options is acceptable as well.

The lender owns your home equity during and after a reverse mortgage.  The title and deed of your home remain in your name.  You don’t need to worry about your lender taking your home from you.  Your lender cannot repossess your home.  You can continue living in your home as long as you like without owing any money to your lender.

Does the equity need to be repaid?

If you move into a new home, you’ll have to pay back your mortgage amount, and if and when you pass away, the responsibility of paying it back will transfer to whoever inherits ownership of your home.  At this point, the home can be sold to pay back the loan.  The government has taken steps to ensure that lender can’t try to collect more money than what the home is worth, even if the loan amount is higher than this due to a decrease in property values.

Kentucky Reverse Mortgage Lenders

All reverse mortgages are structured similarly, with the exception of your payout arrangement, which can be customized to fit your needs.  But different lenders charge different fees and offer different mortgage rates.  What does this mean for you?

It’s simple.  You’ll have to do some research before you select a lender to work with.  Contact at least four or more lenders in your part of Kentucky and ask them what fees they charge.  Compare the quotes and rates they offer.  Pick the lender who offers the best terms.

For more information about applying for a reverse mortgage, read our reverse mortgage checklist.

Kentucky Senior Resources

The Kentucky Aging and Disability Resource Guide provides a number of programs that enable seniors to maintain their indepedence into their twilight while still living in their own home. Use the search tool near the bottom of the page to search for nutrition, transportation, medicare, and other forms of assistance. Many programs are statewide, including popular areas like Louisville, Lexington, and Bowling Green.

Lenders in: Kentucky.