Securing a Kansas Reverse Mortgage

Any senior who plans to retire in Kansas should research and consider a Kansas reverse mortgage as a way to gain the income needed to live well during retirement. This type of mortgage provides the borrower with money sourced from his or her home equity either as a lump sum or in monthly installments.

What is a reverse mortgage?

Theyse mortgage truly operate in reverse: your lender makes payments to you, and you don’t have to pay the loan off until you move out of the home or pass away.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?

The funds you receive can be used to pay for any expense that arises during your retirement. Most seniors simply use their reverse mortgage as a source of day to day income, but medical bills, vacations, and other expenses can be paid for as well. You can also make a down payment on a new home with a reverse mortgage

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 Kansas, 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 get the funds from your lender according to any financial arrangement you want.

• As a lump sum.
• In monthly installments.
• As a line of credit.
• Any combination of the above options.

Your lender will gain ownership of the equity of your home, but your lender will not own the home itself during any part of the process.  After the equity is used up, you can continue living in your home knowing that it rightfully belongs to you.

Does the equity need to be repaid?

Not until you move, sell your home, or pass away. The responsibility of paying back the reverse mortgage will transfer with the ownership of the home to your heirs when you pass away.  Your heirs can simply sell the home and apply the proceeds to the mortgage.  The government has mandated that lenders can’t collect more money than what the home sells for in this instance, which means you don’t need to worry about your heirs getting stuck with your debt.

Kansas Reverse Mortgage Lenders

Check with at least four or five lenders in your part of Kansas for information on what it will cost you to take out a reverse mortgage loan.  You’ll have to pay interest on the equity amount and you’ll be charged several fees that you’ll pay at closing.  These fees can add up fast.  Make sure you find a lender who will charge you a reasonable amount.  For more information on this, read our reverse mortgage checklist.

Kansas Senior Resources

The Kansas Aging and Disability resource website provides a number of program links for services that allow senior homeowners to continue living independently as they age. These services are available all over the state, including popular cities like Topeka, Overland Park, and Wichita. 

Lenders in: Kansas.