Securing a Washington Reverse Mortgage

A Washington reverse mortgage can help seniors and retirees over the age of 62 secure retirement income and remain financially independent during the best years of their lives.  This loan type simply converts home equity into spendable cash.  It transforms the investment value of a home into spendable income that seniors can live on.

What is a reverse mortgage?

Reverse mortgages function very simply.  Your lender purchases the rights to own your home equity and pays you for this right.  The amount you are paid is equal to the amount of home equity your lender purchases, minus fees involved in creating the loan.

How can reverse mortgage funds be used?

Do you simply need money to live on from day to day?  Are you facing rising medical costs?   Or do you simply want to take a nice vacation or finance the purchase of a vacation home?  Any of these aspirations can be accomplished securely and efficiently with money from your own home equity.

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 Washington, 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?

This money can be delivered to you in any number of ways.

• Your lender can provide it to you all at once, in a lump sum, if you prefer.
• Your lender can make payments to you on a monthly basis for as long as it takes to deplete the equity.
• Your lender can provide you with a line of credit tied to your home equity that you can access at any time.

Depending on the financial flexibility you need, you can combine multiple options to craft your own unique payout arrangement.

The ownership of your home remains in your name during a reverse mortgage.  Your lender does not own your home and cannot possess it to pay back debt.  You can live in the home until you pass away without paying back anything to your lender.

Does the equity need to be repaid?

Not until you move or pass away. In the event of your passing, your heirs will have to pay back the reverse mortgage.  Most often, this is done by selling the home and turning the proceeds of the sale over to the lender.  The government guarantees that lenders can not come after your heirs to collect more than what the home sells for, even if the reverse mortgage amount is higher than this.

Washington Reverse Mortgage Lenders

It’s not difficult to find a reverse mortgage lender in Washington.  Lenders love to administer these loans.  They are simple financial instruments that create value for both borrowers and lenders.  But you must take the time to find the best lender to originate your loan.

All lenders charge fees.  This is true when closing any loan type, but reverse mortgage fees are often higher than fees on other loans.  Contact several lenders in your area to find out what fees and rates they charge.  Once you know what deals are available, pick the lender who can best meet your financial needs.

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

Lenders in: Washington.