1. Who is Equity 2 Cash?

Equity 2 Cash is is a Federally Chartered Bank doing business since 1905 we are able to serve all 50 states.

2. Can I do a Reverse Mortgage if I already have a mortgage on my home?

Yes. If you already have a mortgage, a reverse mortgage will pay off your existing mortgage (and thereby make your monthly mortgage payments go away) and you will also receive an additional amount of cash at closing depending on the amount of the existing mortgage that is being paid off.

3. How is the U.S. Government involved with reverse mortgages?

Because of the lobbying efforts of AARP in the 1980's, the U.S. Government established the reverse mortgage program through HUD in 1989. It’s purpose was to provide a means for seniors to stay in their homes for the rest of their lives but obtain cash or income from the equity they built up in their home over the many years of making that monthly mortgage payment. The government did this for seniors because their earning capacity diminishes as they get older yet, due to rising medical costs as we age, expenses often go up.

Reverse Mortgages sponsored by HUD is the U.S. Government’s response to the plight many seniors faced with being “home rich” but “cash poor”. It should be noted that the absolute last thing the government wants is a seniors program that takes advantage of seniors. For that reason, the U.S. Government has put in two very important safeguards.

  • Cap on fees and expenses - the interest rate and all fees associated with reverse mortgages have caps on them to protect seniors.

  • Required counseling for suitability - HUD requires that anyone getting a reverse mortgage make sure it’s right for them by getting “counseling” from a non-profit, approved counseling agency.

    The counseling usually takes 45-60 minutes and the person is issued a counseling certificate.

    4. Why is it better to do a reverse mortgage versus simply refinancing the house with a traditional mortgage?

    Two reasons a reverse mortgage is better;

    First, with a reverse mortgage the senior does not have to make monthly mortgage payments. With a traditional mortgage, monthly payments are required. Remember, with a reverse mortgage the principal and interest is not repaid until the borrower dies. If a married couple does a reverse mortgage, both must die ( or permanently move out of the house ) before the reverse mortgage must be repaid.

    The second reason a reverse mortgage is better is because there is no “income or credit qualifying” with a reverse mortgage. If the person is 62 or older, he/she qualifies irrespective of his/her income. With a traditional mortgage, a person must have good credit and qualify from an income standpoint to support the borrower’s ability to make the monthly mortgage payments.

    5. Could you give me an example of how a reverse mortgage works?

    Through a U.S. Government program you can obtain a loan for approximately 40%-75% of the value of your home at the low interest rate of about 6% and you never have to repay the loan in your lifetime. The only requirement is that you must be 62 or older and own your own home. There is no "good credit" or income requirement to obtain the loan.

    Here’s an example: Let’s say you are 71 and own a house with a value of $180,000 with an existing mortgage of $23,000. That existing mortgage has payments of $600 a month. If you get a reverse mortgage, you would receive the following:

  • $60,000 cash: You would receive about $60,000 in cash that would be paid to you immediately or in monthly payments.

  • $600 a month existing mortgage payment goes away: You no longer have to pay that $600 a month payment because the existing $23,000 mortgage is paid off when you get a reverse mortgage. This is accomplished by the U.S. Government program loaning you 50% of the value of your home ($90,000) via a reverse mortgage. With the $90,000, you would then pay off the existing $23,000 mortgage on the house with the balance ( after closing costs ) going to you in cash.

    As to repayment of the reverse mortgage loan, no repayment is required during your life time as long as you continue to live in your home. Upon your death, the reverse mortgage ( principal and interest ) must be paid by your estate.

    You get cash today and don’t have to repay that cash in your lifetime. That’s what makes a reverse mortgage so unique. When the loan is repaid, your heirs are charged the low interest rate of 5%-6%. The rate is low because the U.S. Government wants to be sure seniors and their heirs are not taken advantage of.

    Further, you retain 100% ownership in the home and you and your heirs get all the future appreciation in value of your home. And, best of all, the only requirement is that the homeowner simply must be 62 or older. That’s it; there are no other requirements.

    6. Are fixed rate loans available?

    Yes they are, but the rate will be higher than the adjustable rate reverse mortgage. The effect of this is that a borrower will receive less money up front on a fixed rate reverse mortgage versus an adjustable rate reverse mortgage.

    7. Will I have to pay any fees out of pocket to obtain a reverse mortgage?

    No. But there are fees to get a reverse mortgage and they will be added to your loan balance so that you do not have to pay them at closing.

    You will pay a loan origination fee of 2% of your home’s FHA appraised value or the FHA maximum loan limit in your county ( whichever is lower ), an appraisal fee and other ordinary closing costs, and the FHA mortgage insurance premium of 2%.

    There are no out-of-pocket costs; all fees are similar to a traditional home mortgage loan. There are no unusual fees associated with a reverse mortgage.

    The fees and closing expenses on a reverse mortgage are higher than on a forward mortgage. But here's an important thing to understand. The interest-rate on a reverse mortgage is less than the interest rate on a forward mortgage. And this is significant because, on average, 82% of the total cost of any long term mortgage is in the interest rate, not in the closing costs and fees.

    In evaluating these fees, here's the key thing to consider - how long do you anticipate staying in your home? If it's long term and you can spread those fees over a number of years, the cost will likely be $500-$800 a year. Not bad at all. But alternatively, if you anticipate moving in the short term, getting a reverse mortgage may not be right for you. The reason is because if you can only spread those fees over a couple of years, it makes the reverse mortgage too expensive.

    It is also worth noting the difference between how closing costs and fees on a reverse mortgage are handled versus how they are handled in forward mortgages. With forward mortgages, a borrower has an option. If the borrower wants to reduce or even eliminate closing costs and fees, he or she can do so by simply agreeing to increase the interest rate. As an example, if the fees and expenses on a regular mortgage are $4000 with an interest-rate of 5%, if the borrower wanted to, he or she could choose an interest-rate of 5 1/4 percent ( an increase of 1/4% ) and therefore have no fees or closing expenses. This is different from reverse mortgages. Adjusting the interest-rate and eliminating closing costs and fees is not allowed by HUD. The reason is for full disclosure. The government wants seniors to see exactly what the closing costs are as well as what the exact interest rate on the loan is. Unlike traditional mortgages, closing fees cannot be eliminated and built in to the interest rate on the loan.

    8. Are there any restrictions on the use of the money I will receive?

    It is your money and how you spend it is completely up to you!

    9. Will I have to sell or vacate my home if the money I owed on the loan exceeds the value of my home?

    Absolutely not! As long as you continue to live in your home as your primary residence, you will never be asked to sell or move out of your home.

    10. Will my heirs owe anything to the mortgage lender?

    Your heirs may either repay the loan or sell the property at its “fair market value”.

    No additional financial claims may be made against your heirs or estate because the reverse mortgage loan is non-recourse, which means that if the loan amount is greater than the home’s value, any outstanding debt balance will be forgiven.

    11. If my home’s value appreciates during the mortgage term of a reverse mortgage, who will be entitled to that money?

    Under the terms of the reverse mortgage, you are legally required to pay back only the outstanding balance of your loan. You or your heirs are entitled to any and all appreciation in the value of your home that exceeds the loan balance.

    12. How much can I borrow?

    The maximum amount that can be borrowed is based on a HUD formula that factors in the age of the youngest borrower, the average expected interest rate, the anticipated rate of your home’s appreciation, and the current value of your home within the FHA insured limits for your area.

    Upon request, a summary is available for your home and the amount of payment you’re now entitled to. Typically a person can borrow about, for general purposes, 40%-75% of the value of their home.

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    13. Will reverse mortgage payments affect my Social Security or Medicare benefits?

    Monies received will not affect eligibility for retirement, survivor, disability, or Medicare benefits payable under the Social Security Act.

    14. What if I decide to sell my home?

    If you choose to sell your home, the outstanding reverse mortgage loan balance will have to be paid at closing. You or your estate will receive any proceeds exceeding the loan balance.

    15. What appreciation or rise in my home’s value should I conservatively anticipate over the years of a reverse mortgage?

    HUD and FHA formulas are 4% each year. It should be noted that approximately the first 4% of appreciation in your house each year will cover the interest being added to your loan by the reverse mortgage.

    16. How safe and secure are reverse mortgages?

    Reverse mortgages are sponsored by the U.S. Government through HUD The fees and expenses that can be charged on a reverse mortgage are tightly regulated by HUD in order to protect the senior.

    17. Why haven’t I heard more of reverse mortgages if indeed the benefit is so attractive?

    The U.S. Government does not advertise benefit programs. The media, approved lenders of the program and word of mouth are the primary communication sources for reverse mortgages.

    The reason the traditional mortgage industry has not pushed reverse mortgages is because the fees are substantially less than traditional mortgages due to the U.S. government’s caps on reverse mortgage fees. These caps are put in place by the government to protect seniors. Accordingly, the traditional mortgage industry has severely limited its advertising for the reverse mortgage product.

    18. How common are reverse mortgages throughout the U.S.A.?

    Some states in the U.S. have had the Reverse Mortgage Program since 1989; though they have been available in Missouri only since 2001.

    19. Will a reverse mortgage hurt my heirs or children; “I always wanted the house left for their benefit”?

    Often heirs and children want the senior citizen to have the best quality of life available. Heirs and children will still benefit from the remaining home equity, future home equity, and the rise in the value of your home.

    Most seniors don’t want to be a burden to their children or heirs; a reverse mortgage gives financial independence and control to the senior. The heir or children of the senior continues to be the best referral of a Reverse Mortgage Program.

    20. How long does the reverse mortgage process take? When should I receive my money?

    Normally, about 38 days from the date of counseling (which occurs right after the application is done) 38 days is our average for all the loans we do. Sometimes loans can be funded in under 30 days.

    21. Why should I trust Your company, Equity 2 Cash?

    Equity 2 Cash is an Approved Direct Lender by Fannie Mae and HUD. The reverse mortgage process is a standard process throughout the country.

    22. Who is eligible for a reverse mortgage?

    The only requirement is that the homeowner is 62 or older. Regarding the home itself, the only requirement is that existing mortgages ( if any ) cannot exceed the amount of the reverse mortgage.