Securing a Delaware Reverse Mortgage

Reverse mortgages are a loan type that taps into the home equity that a retiree has built up in his or her home and distributes it back to the homeowner in the form of spendable cash. Whether you live in an area with historically high home values or not, you can qualify for a reverse mortgage if you’re at least 62 years old and you’ve built up equity in your home.

What is a reverse mortgage?

Lenders pay the homeowner money that comes from the equity in the home. 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?

You can spend this new income on anything you want. This includes medical costs, vacations, gifts for relatives, and more. You can even use it to pay off other mortgages and debts. 

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 Delaware, 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?

Your lender can provide the money from your reverse mortgage to you in any way that you like. Consider the following financial arrangements.

• You can receive the money in installments on a monthly basis.  This is the most common and familiar way to receive the funds.
• You can choose to receive the funds all at once, in the form of a lump sum.

If neither option is right for you, the funds can be disbursed through a credit line tied to your home equity. These methods can be combined as well. This flexibility is a major benefit of reverse mortgages.

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.

Delaware Reverse Mortgage Lenders

It's appropriate to research at least four or five different lenders and contact them to ask about the rates and fees they charge. This is highly important, especially because of the risk of fraud. The less money you’re required to spend, the more money you’ll be able to put to good use. You can learn more about the application process by reading our reverse mortgage checklist.

Delaware Senior Resources

Delaware has a number of programs designed to assist elderly citizens across the state - from Laurel to Dover to Wilmington - remain independent while living at home. Programs range from caregiving to aid for the hard of hearing, and more. Find a service in an area near you by visiting the State of Delaware Resources for the Elderly page. 

Lenders in: Delaware.