Hawaii's Reverse Mortgage Specialist!

Mary Joe Sato

20+ Years of Reverse Mortgage Experience

FREE Phone Consultation: (808)791-1044

What is a Reverse Mortgage and Does a Borrower Retain Ownership?

A Home Equity Conversion Mortgage, or HECM, is a flexible financial product designed for homeowners aged 62 and older. The loan is insured by the Federal Housing Administration (FHA) so that borrowers will not owe more than the value of the home at maturity. With a HECM, also known as a reverse mortgage, you can convert some of the equity in your home into cash to meet financial goals, such as supplementing retirement income, maintaining a good lifestyle, or preparing for a more secure and rewarding financial future.

The borrower retains ownership but of course, as homeowners, you are responsible for occupying the home as your primary residence, keeping up with property maintenance, staying current on paying property taxes, required insurance and any homeowners’ fees. Instead of repaying the loan in monthly installments, you or your estate repay the principal, accrued fees and interest when you no longer live in the home.

Who is Eligible for a Reverse Mortgage?

One of the strengths of the HECM program is that there are not overly restrictive requirements, making these loans easier to qualify for than other financial products such as a mortgage refinance, home equity loan, or home equity line of credit (HELOC).

You are eligible for a reverse mortgage if:

-You are 62 years of age or older

-You own your home and use it as your primary residence

-The house is single family, multi-family, or an approved condominium

-Your home is in good condition prior to taking out the loan

-You must speak with a HUD approved counselor before obtaining a reverse mortgage to determine if the product is suitable for your needs. The counseling sessions will help you understand how the loan works.

-You must upkeep property taxes, homeowner's insurance, basic home maintenance

 What is the Step-By-Step Process?

1. Contact Mary Joe Sato to determine if a reverse mortgage is right for you
2. Counseling   HUD requires that you received third-party counseling from a HUD-approved agency
3. Application
4. Processing
5. Underwriting
6. Closing
7. Disbursement

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How Much Can I Borrow?

The amount of your reverse mortgage is based on is how old the borrower is, how much your home is worth, HUD zoning restrictions and the interest rate that you are offered on the loan. Certain restrictions apply. HUD also regulates the amount of money that can be withdrawn during the first year of your reverse mortgage. This is to help preserve your home equity for a longer period of time.

Please call Mary Joe Sato at (808)791-1044 for a FREE Reverse Mortgage quote!

What are My Options for Withdrawing My Money?

One of the best features of the HECM program is that borrowers are given a great deal of flexibility in how they receive the proceeds of the reverse mortgage.

Your Basic Options:

-Lump sum, receive a large portion of cash when the loan closes

-Monthly payments given to you

-Line of Credit

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How is the Government Involved?

This is a big point of confusion, especially since advertisements have sometimes promoted the reverse mortgage as a government benefit of some kind. First, it's important to note that the FHA, a government agency, is NOT loaning you any money. You are working with a private company, and the FHA is providing a guarantee on your loan. This guarantee protects you in two significant ways. First, the FHA guarantees that the senior will receive all the payments that he or she is entitled to because of the reverse mortgage. This removes the risk of the lender going bankrupt or simply refusing to make good on its obligations. Second, the FHA protects the borrower and his/her estate from ever owing more on the loan than the home is worth. In circumstances where the debt outstanding on the reverse mortgage exceeds the value of the home, the FHA covers the difference.

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Does a Reverse Mortgage Borrower Have Any Obligations?

Yes, the home must continue to be used as the primary residence. Seniors must also maintain the home, do needed repairs, and stay current on property taxes and homeowner's insurance. Otherwise they risk default. Bankruptcy can also be a violation of the reserve mortgage agreement.

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When Do I Have to Pay Back a Reverse Mortgage Loan?

A HECM loan has to be paid off when the last surviving borrower or eligible non-borrowing spouse dies. The loan also becomes due when the last surviving borrower sells the home or permanently moves out. Your heirs can sell the home or refinance the reverse mortgage into a traditional loan.