Securing a Iowa Reverse Mortgage

If you’re a senior and you live in the state of Iowa, you should consider taking out an Iowa reverse mortgage to help fun your retirement. This loan type provides you with a safe and reliable income stream sourced from your own home equity, allowing you to pay for day to day expenses or other costs while remaining financially independent.

What is a reverse mortgage?

The reverse mortgage loan type is a unique, specialized financial option that provides homeowners who are seniors with retirement income. The lender takes over ownership of the borrower’s home equity and makes payments to the borrower until this equity is depleted.

How can reverse mortgage funds be used?

Stuck with rising medical costs? Planning to downsize into a smaller home? Want to take a nice vacation now that you’re retired? You can pay for any of these things through a reverse mortgage.  As your lender gives you money, you are free to spend it in any way that you like.

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 Iowa, 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 your funds to you in a number of ways.

• You can get all your money at once, up front, as a lump sum. This money can then be placed into another investment or used to downsize into a smaller home.
• You can arrange to receive a set portion of the money each month.  You can use this money to pay for anything you need as expenses arise.
• You can access the money through a line of credit. This is one of the most flexible options.
• You can combine these methods to create your own unique payout arrangement.

Does the equity need to be repaid?

You don’t have to pay off the loan if you decide to continue living in your home until the day you pass away. You only have to pay back the loan if you move into a new home or sell your reverse mortgage property. If or when you pass away, your heirs will have to pay back the loan, but this can be easily accomplished by selling the home. Your lender cannot collect funds beyond the home value.

Iowa Reverse Mortgage Lenders

In order to minimize your losses, find a lender who charges the lowest rates and fees. Don’t just speak with the first lender you find and start your application right away. Contact at least four or five different lenders to get ideas of what terms are available in the marketplace before you decide. For more information about what you should and shouldn’t do during the application process, read our reverse mortgage checklist.

Iowa Senior Resources

The Iowa Department on Aging provides a comprehensive list of senior resources for transportation, meal delivery, disability and caregiver assistance, and more. These services enable some to maintain their independence while still living at home. Navigate the menu to the left after clicking the link above to browse services. 

Lenders in: Iowa.