Securing an Alaska Reverse Mortgage

A reverse mortgage may be a source of retirement or other income for senior homeowners who live in Alaska and want to tap into the equity in their homes. Many retirees in the state have used this mortgage program to secure a continuous source of financial support. You don’t have to be wealthy to benefit from a reverse mortgage. You simply equity in your home.

What is a reverse mortgage?

A reverse mortgage is a unique and highly specialized loan type that is available exclusively to senior homeowners over the age of 62. With this mortgage, the lender makes payments to the homeowner on a monthly basis or in a lump sum, as opposed to a traditional mortgage where payments are made to the lender to build equity. The reverse mortgage funds come from the equity stored up in the home. 

How can reverse mortgage funds be used?

You can use these funds to pay for anything you want. There are no limitations. Put the money toward living expenses, medical costs, vacations, gifts for relatives - the list goes on.  You can even use it to pay off other mortgages and debt obligations, or to make a down payment on a new home if you wish to downsize.

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 and history are not qualifying criteria. 

What costs are associated with a reverse mortgage?

There are several costs associated with securing an HECM reverse mortgage in Alaska, 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?

Your lender will provide you money in whatever way best meets your needs and fits with your financial plans. You can choose to get the funds in any of the following ways.

• A lump sum equal to the full amount of equity in your home.
• Through continued use of a line of credit tied to your equity.
• Monthly payments of a specified amount.
• Any combination of the above options.

As your lender provides you money, he or she gains ownership of more and more of the equity of your home. Your lender will never officially own your home, however, even once the equity is depleted. You always retain full ownership rights to your home.

Does the equity need to be repaid?

You don’t have to pay back the funds when the equity runs out. Not right away, at least. Homeowners can continue living in the home until the event they pass away if they choose, and free of charge. The home will pass to heirs. They will be responsible for paying off the mortgage, which is usually accomplished by simply selling the home. If the heirs wish to keep the home, they can refinance the loan and pay it off themselves.

Alaska Reverse Mortgage Lenders

Different lenders offer different rates and terms on the reverse mortgages they provide. There are multiple lenders available in Alaska who can help you close your new loan. Any of these lenders can provide you the advice you need to get through the loan process successfully.

It’s not enough to get a mortgage rate quote from just one or two lenders. If you can, try to get information on the rates that are available to you from at least four or five different lenders in your area. Look for the lowest rates before you move forward.

Another important thing to consider is the fee that you’ll be charged when taking out your reverse mortgage. You’ll have to pay several different fees when closing the loan, including an origination fee of several thousand dollars. These costs differ from lender to lender. Check out our Reverse Mortgage Checklist for more information about costs and the application process.

Alaska Senior Resources

The Alaska Commission on Aging (ACOA) has implemented a structured process of improving the services for older Alaskans. One such program called Senior Benefits offers monthly cash payments to state residents aged 65 and older, so that they may continue to live independently at home. Recipients must be low to moderate income. There are no location restrictions or requirements, so seniors living in major cities like Anchorage, Wasilla, and Juneau are still eligible. 

Lenders in: Alaska.