Securing an Arkansas Reverse Mortgage

If you’re a senior homeowner over the age of 62 with significant equity in your home, you likely qualify for an Arkansas reverse mortgage. This is a specialized mortgage program designed to provide retirees and the elderly with steady income tapped from the equity in their own homes. You don’t have to make any mortgage payments or even pay the loan off.  

What is a reverse mortgage?

Your lender or bank provides you with money from your home equity on a regular basis in exchange for ownership rights to a portion of your home equity. This differs from traditional mortgage agreements, in which borrowers make payments to the lender to build equity.

How can reverse mortgage funds be used?

This money can be spent on anything and everything. Many seniors choose to use these funds to pay for bills, medical costs, family vacations, or as retirement income. You can also use the money to pay off your current mortgage or eliminate other debts you may owe.

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 Arkansas, 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?

You can choose to receive the funds from your lender in any of the following ways:

• Lump sum.
• Monthly payments.
• Line of credit.
• A combination of these methods.

This allows you the flexibility to craft a financial arrangement that works for you. Again, your lender will gain ownership of the equity that is paid out to you. But you don’t need to worry about losing your home. Your lender will never take ownership of the title or deed of your home at any point during the reverse mortgage. Even in the event no equity is left, reverse mortgage homeowners can continue living in the home until they pass away.

Does the equity need to be repaid?

The responsibility of paying back the mortgage falls to your heirs, who also gain ownership of the home. The home can then be sold and the proceeds used to pay back the reverse mortgage. If your heirs wish to keep the home, they can refinance the loan and pay it off over time themselves. There are federal laws in place to guarantee that your lender can’t collect more than the value of the home, even if your home value has decreased and your loan amount is higher than the current value.

Arkansas Reverse Mortgage Lenders

Before you decide to take out a reverse mortgage, make sure you’ve found a lender you can trust who will be able to help you close your loan swiftly and simply. Most lenders offer different rates than other lenders. Make sure you shop around and contact at least four or five lenders in Arkansas to get a feel for the rates that are available.

Also, make sure you find out what fees these lenders will charge you to close the loan.  Mortgages aren’t free. Every mortgage comes with closing costs attached, as well as origination fees and other minor expenses.  These costs can add up when you’re taking out a reverse mortgage. Ask each lender what you’ll need to pay, and try to work with the lender who charges the lowest fees.

Read our Reverse Mortgage Checklist to learn more about applying for a reverse mortgage.

Arkansas Senior Resources

The Arkansas Division of Aging and Adult Services lists a number of senior assistance programs that allow older adults to continue living at home independently. Many can be used in conjunction with the income provided by a reverse mortgage, and while some have income caps, no location restrictions apply so popular areas like Little Rock, Fayetteville, and Texarkana are still eligible. 

Lenders in: Arkansas.