Reverse Mortgage Quiz
As more and more Americans reach retirement age, scores of them are looking for creative ways to achieve financial freedom. One solution is the Home Equity Conversion Mortgage or HECM program. Commonly referred to as a “reverse mortgage”, it allows senior homeowners to take out a portion of their property’s equity. The homeowner has the choice of withdrawing the funds through a line of credit, in a fixed monthly amount, lump sum, or combination of all three.
Repayment is required when either the last surviving homeowner moves out of the home or passes away. The estate then has a 6-month period in which to repay the balance, which is typically handled through a property sale. The estate or heirs are not financially responsible if the home sells for less than what is owed on the reverse mortgage. The estate in turn inherits the remaining equity. Reverse mortgages are federally insured and have no income or credit requirements. For those reasons, they are great for older seniors on a fixed income.
So, think you know everything there is to know about how reverse mortgages work? Take this short true/false quiz and find out:
1. Only retired individuals are eligible. True___ False___
2. The cash received from a reverse mortgage is tax-free cash. True___ False___
3. The borrower can only receive the proceeds from a reverse mortgage in the form of a fixed monthly payment. True___ False___
4. Your Social Security payments will not be impacted by a reverse mortgage. True___ False___
5. When you take out a reverse mortgage, you no longer own your home. True___ False___
6. A reverse mortgage is due when you turn 70. True___ False___
7. You will receive half of what your home appraises for when you take out a reverse mortgage. True___ False___
8. Counseling is part of the reverse mortgage process. True___ False___
9. A reverse mortgage can result in the borrower owing more than the home is worth. True___ False___
10. You can only purchase a single-family home with a reverse mortgage. True___ False___
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1. False-62 is the minimum age requirement.
2. True-It is a tax-free proposition.
3. False-These or a combination of these is how funds will be paid out: line of credit, in a fixed monthly amount or lump sum.
5. False-You will continue to won your home.
6. False-The age is actually 100.
7. False-The amount of money you can receive from a reverse mortgage loan is determined by the current interest rate, your home’s value and the age of the youngest homeowner.
9. False-Because an HECM is considered a “non-recourse” loan, the original borrowers will never be in an underwater mortgage scenario, regardless of the amount due on the loan.
10. False-In addition to single-family homes, HUD-approved condos, manufactured and modular homes are also allowed.