Securing a Louisiana Reverse Mortgage

The Louisiana reverse mortgage is one of the best financial opportunities available to seniors who need to secure reliable income during their retirement years.  If you’re over the age of 62 and you own a home with equity, you can qualify for this unique loan type and get the money you need to live a financially independent lifestyle.

What is a reverse mortgage?

Lenders pay the homeowner funds instead of the other way around. The money comes from your own home equity. Your lender takes control of your home equity and gives you money equal to the value of this amount minus fees and applicable mortgage rates. 

How can reverse mortgage funds be used?

The funds you receive can be put toward any bills or costs you incur or expenses you need to pay.  Most seniors simply use their reverse mortgage money to pay day to day costs of living.  You can place the funds in other investments, pay off debt, or even take out a mortgage 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 Louisiana, 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 choose to receive your money from your lender in any of the following ways.

• All at once.
• In monthly installments.
• As a credit line.
• Any combination or variation of the above.

Your lender will gain ownership of your home equity, but don’t let this alarm you.  Your lender will not own your home at any point, even once the equity is gone or you have passed away. 

Does the equity need to be repaid?

You won’t have to pay the reverse mortgage back during your lifetime unless you move into a new home. Ownership of your home will transfer to your heirs, who can then sell it to pay off the reverse mortgage debt or refinance the mortgage into a traditional loan to keep the home. Heirs will assume no debt beyond the home sale value.

Louisiana Reverse Mortgage Lenders

Finding a lender is arguably the most important and most difficult part of the reverse mortgage process.  Though a reverse mortgage simply provides your own home equity to you in the form of cash, you’ll have to pay a fee to your lender for this service.  Each lender you contact will quote you a different fee and a different mortgage rate.

Check with at least four or five lenders in your part of Louisiana to find out what the marketplace has to offer.  Once you find the lender who offers the lowest rates and the lowest fees, you’re ready to apply for your loan.  For more information on this, read our reverse mortgage checklist.

Louisiana Senior Resources

The Louisiana Aging and Disability Resource Center lists a number of services available to state seniors, including those which enable seniors to continue living in their homes independently. Services include transportation, counseling, meal assistance, and more. They are abailable statewide, including popular cities like New Orleans, Bossier City, and Baton Rouge. 

Lenders in: Louisiana.