Securing a New York Reverse Mortgage

One of many financial options available to seniors and retirees in the state of New York is the New York reverse mortgage.  This loan type functions in a specialized way.  It allows seniors to access their home equity and spend it as cash.  Very few financial instruments are designed to accomplish this.

What is a reverse mortgage?

Your lender takes over ownership of your equity by “purchasing” it from you with a loan.  The lender then makes payments to you each month until the full equity amount is reached, minus expenses.  Reverse mortgage in New York are often used by to secure necessary income for day to day living expenses.

How can reverse mortgage funds be used?

You’re not limited in how you can spend the money.  You can use the money to pay for medical bills, a vacation, the down payment on a new home, other debts you may have, or anything else.  It’s your home, your equity, and your money. 

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 New York, 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?

How you receive your income from your lender is entirely up to you.  You’re in charge.  You can choose to have your lender provide you the funds in any of the following ways.

• As a lump sum.
• Through a monthly payment plan.
• Through a credit line.

If you want, though, you can actually combine any of these methods to create a customized cash retrieval system that fits with your lifestyle and financial needs.

As mentioned above, your lender owns the equity of your home during and after a reverse mortgage.  But you don’t need to worry about losing your home.  The title of the home retains your name and information.  Your lender has no claim of ownership on the property itself.  You cannot lose your home in a reverse mortgage.

Does the equity need to be repaid?

You do not have to remunerate the lender unless you move, sell, or pass away.  Your heirs will inherit the home upon your passing.  This event will cause the reverse mortgage balance to come due, and whoever receives ownership of the home after you pass away will be required to pay it.  But you don’t need to worry about leaving behind a load of debt for your heirs.  Whoever owns the home can simply sell it to pay back the mortgage.  The federal government has instituted a regulation that prevents lenders from collecting more money than what the home sells for, even if the reverse mortgage amount exceeded the value of the home.

New York Reverse Mortgage Lenders

Most lenders are eager and willing to work with seniors on reverse mortgages, but you should take the time to do some research.  Not all lenders offer the same mortgage interest rates, and some charge high fees to administer reverse mortgages.

Compare the rates and fees charged by at least four or five lenders in your area.  This will give you a good idea of what terms are available to you.  Find the lender who can service your loan most effectively and affordably.

You can learn more about locating lenders and applying for this loan type by reading our reverse mortgage checklist.

New York Senior Resources

The New York State Office of the Aging (NYSOFA) lists several programs and services aimed at assisting seniors maintain their independence while continuing to live at home. Among the services are meal, health insurance, employment, nutrition, and transportation assistance. 

There are also local area agencies for the aging all over New York, including Albany, Auburn, Carmel, Waterloo, and Catskill. To find an agency near you, consult NYSOFA's local aging offices page. 

Lenders in: New York.