Securing a North Carolina Reverse Mortgage

You can qualify for a North Carolina reverse mortgage if you live in the state and you’re over 62 years of age and you own a home.  You must meet a minimal home equity requirement, but if you have enough, you shouldn’t face any obstacles when trying to take out a reverse mortgage.

What is a reverse mortgage?

Reverse mortgages in North Carolina allow you to tap into the equity in your home and turn it into income you can spend on daily purchases or living expenses. As long as you have enough equity in your home and qualify, you can pursue a reverse mortgage, stop paying your lender, and have the lender pay you. 

How can reverse mortgage funds be used?

Want to take a nice vacation with your family?  Need to pay for medical bills or senior housing?  Want to help your grandkids through college?  Or do you simply need money to live on?  Any of these costs can be met and taken care of with the funds from a reverse mortgage. 

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 North Carolina, 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?

You can receive the money from your reverse mortgage in a variety of ways.  You can choose one of the following methods.

• A lump sum at the start of the loan period.
• Monthly payments throughout the loan period, until the equity runs out.
• A line of credit opened at the start of the loan period.  The credit does not have to be repaid until the full loan amount is due.

You can also combine more than one method to develop the payout system that will work best for you.

Your lender takes ownership of your home equity at the start of the reverse mortgage.  But your lender does not own your home, as with other mortgages.  The reverse mortgage loan is not secured by your home or property. You will always own your home, even after a reverse mortgage, unless you move or decide to sell it.

Does the equity need to be repaid?

You don’t have to pay back the reverse mortgage debt during your lifetime if you don’t move or sell.  If you choose to live in the home permanently, the debt will pass to your heirs with ownership of the home upon your passing.  Your heirs will then need to pay back the debt, but this is typically done by selling the home and turning the funds from the sale over to the lender.  If your heirs wish to keep the home, they can refinance the reverse mortgage into a traditional loan and pay it off again.

North Carolina Reverse Mortgage Lenders

Make sure you get the best mortgage rate and the lowest fees when you take out your reverse mortgage.  How can you do this?  It’s not hard, but you must be diligent and willing to put in the effort.  Take the time to research four or five local lenders in your part of North Carolina.  Ask them what rates and fees they charge, but don’t pick one to work with yet.  Wait until you’ve spoken with several and know what terms you can get elsewhere.

If you can spare a week or two to conduct this research, you could end up saving thousands of dollars on your reverse mortgage.  For more information about this and about how to apply for a reverse mortgage, read our reverse mortgage checklist.

North Carolina Senior Resources

The North Carolina Division of Aging and Adult Services (NC DAAS) provides a list of services available to help seniors stay independent while living at home. The services include assistance with home repair or renovation, and are available from Alamance to Wilson counties. To find home services near you, consult the NC DAAS programs map. 

Lenders in: North Carolina.