Securing a New Mexico Reverse Mortgage

The New Mexico reverse mortgage option is one of the most effective financial  tools available to seniors and retirees who need to secure a steady stream of income to live on during the best years of their lives.  If you own a home and you’ve built some equity in it, you’re likely qualified to take advantage of this specialized loan option.

What is a reverse mortgage?

These loans are designed to transform equity into income.  Seniors who take out reverse mortgages in New Mexico are able to live well without giving up their home ownership rights. The additional income these loans provide has allowed many retirees to pay for medical costs, bills, taxes, and living expenses with ease.

How can reverse mortgage funds be used?

The money you receive is your money.  It comes directly from your home equity.  There are no stipulations as to how it can be spent. 

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 New Mexico, 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?

Your lender will take ownership of the equity and provide you an equivalent amount of spendable income, minus fees.  You can choose to receive this money in a number of ways.

• Your lender can deliver all of it to you as a lump sum when the loan closes.
• You can get it in segments or portions on a monthly basis until the equity is depleted.
• You can establish a line of credit with your lender that taps the equity whenever you need it.

You can also combine any of the above options to create the payment method that best meets your needs.

Once your lender has taken control of your equity, you will begin receiving your funds.  Many seniors are hesitant to take this step out of fear that lenders will repossess their homes once the equity is fully expended.  This is not the case.  The title or deed to your home remains in your name at all times during and after the reverse mortgage process.  Your lender will never own your home.  You are free to continue living in it as long as you like.

Does the equity need to be repaid?

Equity repayment is not due until the reverse mortgage homeowner moves, sells their home, or passes away. 

If you live out your life in the home, your home will pass to an heir.  This heir becomes responsible for paying back your reverse mortgage debt.  But you don’t need to worry about sticking your children with the loan.  The mortgage amount is tied to the home itself.  If your home decreases in value, the repayable loan amount decreases as well.  This ensures that your heir can sell the home and pay off the debt in full.  The only negative aspect of this transaction is that your heirs won’t be able to keep your home unless they choose to refinance and pay off the debt themselves.

New Mexico Reverse Mortgage Lenders

Taking out a reverse mortgage is simple and affordable if you find the right lender.  If not, you may end up paying a lot of money for the right to access your own equity.  Try to avoid this at all costs.  Research as many lenders as possible in your part of New Mexico and ask them what mortgage rates and closing fees they charge.  Find the most affordable lender to work with.  This comparison is essential if you want to get the best deal on your loan.

You can also learn more about applying for a reverse mortgage by checking out our reverse mortgage checklist.

New Mexico Senior Resources

The New Mexico Aging Network lists a number of programs designed to assist seniors with maintaining independence while continuing to live in their homes. Chore, transportation, nutrition, and employment assistance programs exist statewide, especially in populous areas like Albuquerque. For more information about these programs, visit the official site in the link above. 

Lenders in: New Mexico.