Securing a North Dakota Reverse Mortgage

A North Dakota reverse mortgage is a unique loan type that is offered only to seniors over the age of 62 who own homes with equity.  This requirement makes these mortgages highly exclusive, but many retirees in the state are qualified to receive funds for retirement expenses through this loan type.

What is a reverse mortgage?

A reverse mortgage is unlike any other mortgage available.  It truly functions in reverse.  Essentially, your mortgage lender buys the equity of your home from you and pays you for it on a monthly basis.  With mortgage payments flowing into your bank account rather than out of it, you’re able to sleep easily at night knowing that you have access to a steady stream of reliable income.  Reverse mortgages in North Dakota are great for retirees who don’t have other income to leverage.

How can reverse mortgage funds be used?

The funds you receive through your reverse mortgage come directly from your home equity.  This means the money is already yours.  You can spend it on anything you need to spend it on.  This includes medical bills, debts, other mortgages, a luxurious vacation, or simply daily living expenses.  The choices are entirely up to you.  Most seniors choose to spend their reverse mortgage money on living expenses and enjoying their retired years.

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 Dakota, 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 get your money in one of several ways.

• You can arrange to receive the full amount of your equity from your lender all at once, as a lump sum, at the start of the reverse mortgage.
• You can receive the money each month, as a payment that can be put directly into your bank account.  This money acts like income, though it’s not taxable.
• You can have your lender set up a credit line attached directly to your home equity.
• If you want, you can arrange a combination of any of these options.

Your lender will take over ownership of your home equity at the start of the reverse mortgage.  During this time, you continue living in your home without making any mortgage payments.  Once the equity runs out, you can continue living in your home as before without paying anything back.  Your lender does not own your home and cannot repossess it to recoup the reverse mortgage amount.

Does the equity need to be repaid?

You don’t have to pay your reverse mortgage back until you decide to move out of your home and into a new home.  If you choose not to do this but instead continue living in your home for the rest of your life, you’ll never have to pay it back.  The debt will transfer to whoever inherits ownership of your home upon your death.  This individual, your heir, must pay back the debt.  But this can be easily accomplished by selling the home.  A sale of the home, in which the proceeds are given to the lender, automatically eliminates the entire reverse mortgage debt, even if the loan amount was made for more than what the home is worth.

North Dakota Reverse Mortgage Lenders

There are many mortgage lenders in North Dakota, and most of them are eager to provide reverse mortgages.  These loans are good for both borrowers and lenders.  But every lender will offer a slightly different set of fees and mortgage rates tied to the loan.  Contact several lenders before you choose one to work with and find out what fees are available.

Fees for reverse mortgages can be steep.  Carefully evaluate all origination fees and closing costs each lender charges.  Once you have an idea of what the market is like, pick the lender who can meet your needs most affordably.

Read through our reverse mortgage checklist if you want to learn more about financing your retirement with a reverse mortgage.

North Dakota Senior Resources

The North Dakota Department of Human Services has an Adults and Aging division which lists a number of programs available to seniors who'd like to preserve their independence while living at home. Consult the official site in the link provided above to see if any services are right for you or your loved one pursuing a reverse mortgage. 

Lenders in: North Dakota.