Securing a Michigan Reverse Mortgage

Seniors who live in the state of Michigan can take advantage of a Michigan reverse mortgage to get the money they need for retirement.  Over time, homeowners build up significant wealth through the equity in their homes.  A reverse mortgage transforms this wealth into spendable cash that can be used to pay for any expenses that arise.

What is a reverse mortgage?

There is nothing else like a reverse mortgage available in the financial marketplace.  In a reverse mortgage, your lender “purchases” your home equity from you and pays you back for it over time in monthly payments until the equity amount is fully paid out.  Many seniors have used reverse mortgages in Michigan to secure stable and reliable income during the best years of life.

How can reverse mortgage funds be used?

Don’t be afraid to spend the money any way you need to.  No two reverse mortgages are designed the same way, and no two reverse mortgages are spent the same way.  Medical bills or other debts may take precedence over luxurious vacations, depending on your situation.  You may decide to place a down payment on a second home or send your grandkids to college.  Whatever it may be, the money is yours.

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 Michigan, 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?

Your lender will provide your money to you in one of the following ways:

• A lump sum right away.
• Monthly payments over time.
• A credit line that you don’t pay back.
• Any combination of the above choices.

Your lender will own the equity of your home but not the home itself.  You don’t need to be afraid that your lender will repossess your home or foreclosure when the equity runs out.  By law, your lender cannot do this.  

Does the equity need to be repaid?

You don’t even have to pay the money back unless you decide to move to a new home. If you choose to live out your life with the home, he reverse mortgage will be paid back by your heirs upon the time of your passing, but only by whoever receives the home as inheritance.  The home can then be sold and the proceeds given to the lender.  The lender cannot collect more money than what the home sells for.

Michigan Reverse Mortgage Lenders

The most important part of the reverse mortgage process is finding the right lender to work with.  It’s difficult to make mistakes when taking out a reverse mortgage loan, as the entire loan is designed to benefit you, but it’s easy to choose the wrong lender and pay more money than you need to in extra fees and closing costs.

Contact at least four or five different lenders in your part of Michigan.  Ask them what mortgage rates they offer and what fees they charge.  Work with whichever lender offers the best deal.  For more information on this, read our reverse mortgage checklist.

Michigan Senior Resources

Michigan's Office of Services to the Aging has a number of agencies throughout the state that assist seniors with daily needs and provide them with a foundation for living independently at home. Programs include transportation, nutrition, legal help, and more. Find an agency near you by browsing the Office of Service to the Aging's area agency map. 

Lenders in: Michigan.