Securing a Florida Reverse Mortgage

If you’re a senior and you own a home in the sunny state of Florida, you can secure a stable stream of retirement income for yourself by taking on a reverse mortgage. This mortgage taps into your home equity and transforms it into cash you can spend on any expenses that arise. You don’t need to be wealthy or even financially successful. All you need is equity in your home.

What is a reverse mortgage?

When homeowners take out a reverse mortgage loan, their lender pays them and homeowners are not required to make payments. Reverse mortgages were designed to give seniors with home equity the money they need to live in financial security. 

Your lender provides you funds up to the total amount of equity you own in your home. In return, the lender takes ownership of the equity in your home, but does not own the home.

How can reverse mortgage funds be used?

You can use the money the lender gives you however you want. You can pay off medical expenses, eliminate debts, take a vacation, or even use it to make a down payment on a new home.

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 Florida, 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?

You can receive the funds from your reverse mortgage in a number of ways:

• As a lump sum for the full amount of equity.
• As a monthly payment until the equity is depleted.
• As a credit line you can access at any time.

You can combine any of these methods to customize your own financial arrangement.

Does the equity need to be repaid?

As mentioned above, ownership of your home equity transfers to the lender during a reverse mortgage. This doesn’t mean that your lender owns your home. This is entirely untrue. You retain full ownership of the home itself and can continue to live in it for the rest of your life without paying a dime to your lender.

In the event you pass away, your home will pass to your heirs, who will be required to pay back the mortgage amount. Your heirs can sell the home and pay back the loan with the proceeds from the sale, or, if they want to keep the home, they can refinance the reverse mortgage into a traditional mortgage and pay it off over time.

Florida Reverse Mortgage Lenders

Before you agree to work with any lender on your reverse mortgage loan, make sure you’ve found the lender who can best meet your needs. Every lender offers a slightly different mortgage rate than every other lender. Contact at least four or five lenders in your area to get rate quotes.

The most important thing to consider when selecting a lender is the fees that the lender will charge. Many reverse mortgages are very expensive and require thousands of dollars of origination fees and closing costs. Find a lender who won’t charge such high fees, but make sure the lender is reputable, too. For more information on this process, read through our reverse mortgage checklist.

Florida Senior Resources

Florida's Department of Elder Affairs provides a comprehensive senior living resource guide which includes several programs for preserving the independence for seniors living at home. The programs are often available throughout the entire state, including popular cities like Miami, Boca Raton, Tallahassee, and Orlando. Find out more by browsing the official site: Department of Elder Affairs. 

Lenders in: Florida.