Securing a Connecticut Reverse Mortgage

If you’re interested in receiving a steady source of reliable income through a reverse mortgage, there are many lenders who can assist you. Retirees and seniors over the age of 62 who own homes can get the money they need to cover living expenses and other necessities and costs by tapping into the equity built up in their homes.

What is a reverse mortgage?

Reverse mortgages operate differently than traditional mortgages: instead of paying monthly to build equity in your home, you don’t pay any money to the bank; the bank pays you. The money comes from the equity in your home, which is investment money and now readily available to cover day-to-day or other expenses. The lender takes ownership of this equity - without staking ownership of your home - and provides you with funds monthly or in lump sums. 

How can reverse mortgage funds be used?

Money from your reverse mortgage can be put toward medical bills, debts, vacations, food and household items, and more. You can use it for anything. It’s a secure, stable source of income pulled directly from your own home value. 

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 Connecticut, 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 arrange virtually any method you want in which to receive the funds from your reverse mortgage. Take a look at the following options to get started.

• The most common way to receive payments is on a monthly basis, directly from your lender.
• You can also receive all of your equity at once as a lump sum payment.
• You can open a line of credit tied to your equity that allows you to use your money as you need it.

Any combination of these options can be arranged as well. You could, for example, take out half your equity as a lump sum and then arrange to receive the remaining half on a monthly basis.

Does the equity need to be repaid?

You will only have to pay the equity to the lender if you move into a new home. But you don’t need to worry about losing your home. Your lender doesn’t own your home. You can freely remain in your home without making any further payments for the rest of your life. Even once the equity runs out, the bank still has no control of the title or deed of your home and you’re not required to pay back the mortgage amount.

In the event the reverse mortgage homeowner passes away, their heirs will be required to reimburse the lender. But they will only have to remunerate up to the amount of value in the home, ensuring that whoever inherits the estate won’t have to deal with any unpaid debt. Heirs can simply sell the home and turn the money over to the lender.

Connecticut Reverse Mortgage Lenders

Any lender you contact to provide you with a reverse mortgage will offer you a specific mortgage rate and give you information about the fees involved. But all lenders offer different rates on their mortgages.  This is true of any loan you take out. As a result, you need to make sure you’ve done some research and found the lender who can offer you the lowest mortgage rates.

The fees associated with reverse mortgages can be very expensive if you don’t get a good lender.  Origination fees and closing costs add up fast. Ask at least four or five different lenders what fees they charge before deciding which one to work with. For more information about the application process, see our reverse mortgage checklist.

Connecticut Senior Resources

The Connecticut Agency on Aging provides a number of resources for seniors and their family members on their website. There are no location restrictions, so programs in popular areas like Hartford, New Haven, and Bridgeport exist. Among the program themes listed are nutrition, medical care, caregiving assistance, transportation, and other services that enable seniors to continue living independently in their own homes. Special programs that assist veterans in preserving independence are also available. 

Lenders in: Connecticut.