Securing a Wisconsin Reverse Mortgage

In Wisconsin, seniors can take advantage of a specialized financial tool to tap into their home equity and withdraw funds for spending purposes.  This tool has allowed many seniors to establish safe, secure retirement income while living in their homes without sacrificing financial independence.

What is a reverse mortgage?

Your lender purchases the full value of your home equity from you and pays you back for it either all at once or over time.

How can reverse mortgage funds be used?

This cash can be spent on anything you need to spend it on, including medical bills, vacations, the down payment on a new home, other debt expenses, and daily living costs.  The money is all your money from the very beginning.

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 Wisconsin, 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?

When your lender pays you in exchange for your equity, the payment can be arranged in any number of ways.  Check out the following options.

• A lump sum payment, equal to the full amount of the equity you own.
• A series of monthly payments of a predetermined amount.
• A credit line tied directly to the reservoir of your equity.

You can combine any of these options as well.  If you want to put some of the money into a credit line to cover extraneous expenses and receive the rest as income on a monthly basis, you can do this.  If you want to receive a major lump sum payment at the beginning of the loan and place the rest in a credit line, you can do this as well.  Any combination is possible if your lender agrees to it.

Does the equity need to be repaid?

If you continue living in your home until the day you pass away, you won’t ever have to pay back a penny of your reverse mortgage.  If, though, you decide to move or sell your home, you’ll have to pay back the reverse mortgage amount in full.

Most borrowers remain in their homes for the remainder of their lives.  In this event, your heirs will have to pay back the debt.  This is most often done by simply selling the home.  Federal regulations dictate that lenders cannot collect more money than what the home sells for at this time.  In other words, your heirs will never have to pay back any of your debt out of their own pockets.  The value of your home will cover everything.

Wisconsin Reverse Mortgage Lenders

You won’t have any trouble finding lenders who are willing and ready to provide you with a reverse mortgage.  The trick, though, is determining which of these lenders can close your loan at the lowest cost and with the lowest rate.

If you take the time to compare multiple mortgage lenders, you’ll be able to identify which loan deal best fits with your financial goals.  Read our reverse mortgage checklist or contact a lender to learn more about applying for a reverse mortgage.

Wisconsin Senior Resources

Wisconsin's Department of Health Services website has a page devoted to senior resources. Many promote senior independence for living at home, including protective and caregiver services, employment, and Alzheimer's support. Local areas on aging which help seniors take advantage of many community and home-based services can be found here. Agencies are located in Milwaukee and Madison, but services are available statewide. 

Lenders in: Wisconsin.