Securing a Ohio Reverse Mortgage

An Ohio reverse mortgage can help you secure the money you need to live comfortably and securely throughout your retirement.  You must be at least 62 years old and own a home with equity in it to qualify, but if you meet these requirements, there’s no reason why you can’t take out one of these specialized loans.

What is a reverse mortgage?

This mortgage is structured in a radically different way than any other mortgage offered.  The lender takes ownership of your equity and pays you back for it over time.  This arrangement provides you with spendable income, which is something you need, and eliminates the equity in your home, which is something you don’t need much longer.

How can reverse mortgage funds be used?

You can pay for anything you want or need to pay for with the money you receive from your reverse mortgage.  The choices are all entirely yours, since the money technically already belongs to you.  It’s simply being converted from one form into another.  You can put it toward medical costs, college tuition for family and friends, living expenses, or paying off debts.

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 Ohio, 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 work out a customized payment arrangement with your lender and receive the money however you need it.

• As a lump sum.
• In monthly installments.
• Through a credit line.

If none of these is right for your financial situation, you can combine two or more methods and create a customized payment option.

In order for a reverse mortgage to take place, your lender must own the equity in your home.  This is simply how the mortgage process works.  But unlike other mortgages in which the loan is secured by the home and you lender has the right to possess this property if the loan is not properly repaid, a reverse mortgage allows you to continue living in your home until the day you pass away or decide to move.  Your lender does not gain any ownership rights to the home itself.

Does the equity need to be repaid?

Equity does not need to be repaid unless you move, sell the home, or pass away. Whoever inherits the home if and when you pass away will be required to pay back the reverse mortgage.  But you don’t need to worry about losing your financial independence or leaving a mountain of debt for your children or heirs.  The lender can only collect as much money as the home sells for.  This is how most reverse mortgages are paid off, and the government has established regulations that protect your heirs from lenders who may try to collect more than the sale amount.

Ohio Reverse Mortgage Lenders

The only difficult aspect of getting a reverse mortgage is finding a lender.  There are many lenders who are eager to provide these loans, but many of them require steep fees to close the deal.  They charge these fees because they know you technically already have the money in your home equity and can afford to pay them handsomely.  You don’t have to put up with this.  Find a lender in your part of Ohio who is willing to charge you fair rates and fees.

The best way to do this is to contact multiple lenders and ask them what they charge.  Lenders will typically answer with their lowest possible rates first.  Dig a little deeper.  Find out what fees they’ll actually charge you.  These fees may vary depending on your personal financial situation.

If you want to learn more about contacting lenders and applying for loans, read our reverse mortgage checklist.  We go over these topics and others in detail.

Ohio Senior Resources

Ohio's Department of Aging has local area agencies that help seniors maintain their independence while living at home or elsewhere. Their resources include programs for transportation, medical, legal, and nutrition. Agencies are in Cincinnati, Dayton, Columbus and more. To find an aging resource center near you, consult the area agency map. 

Lenders in: Ohio.