Securing a Oregon Reverse Mortgage

If you’re a senior and you’re planning to retire in the beautiful state of Oregon, make sure you’ve established a source of income to live on during the best years of your life.  One way to do this is through an Oregon reverse mortgage.  This mortgage is tied to the equity in your home, and it works in reverse.  Your lender makes payments to you each month in exchange for gradual ownership of this equity.

What is a reverse mortgage?

In a traditional mortgage, the borrower pays the lenders in order to build home equity. In a reverse mortgage, the lender pays the reverse mortgage borrower out of their own home equity. Payments come in different forms and stop when home equity depletes. 

How can reverse mortgage funds be used?

The money you get through your reverse mortgage is already yours, and as a result, your lender is taking on very minimal risk.  You can spend the money in any way you want.  Use it to pay for medical expenses, other debt obligations, vacations, gifts for relatives, a down payment on a new home, or anything else.

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 Oregon, 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?

When your lender takes over your home equity, you can arrange to receive your new income in a number of ways.

• You can get it monthly, paid in installments.
• You can get it all at once at the start of the mortgage, as a lump sum.
• You can get it as you need it through accredit line.

You can also combine any of the above choices to arrange your own customized income stream.

Your lender won’t own the title or deed to your home at any time before, during, or after you take out a reverse mortgage.  Your lender owns the equity only, which gives the lender very minimal power over your home.  Your lender cannot repossess your home.  You can continue living in your home without making any payments on your reverse mortgage until the day you pass away.

Does the equity need to be repaid?

You don’t’ have to pay the mortgage back at any time during your life unless you want to move to a new home or sell your current home.  When either of these occurs, your lender will need to recoup the value of the equity that has been purchased.

When you pass away, your heirs will be required to pay off the reverse mortgage.  But don’t’ worry.  You aren’t passing any debt to them beyond the value of the home itself.  They can simply sell the home and pay back the full amount.  If the home decreases in value and the sale price is not sufficient to cover the full reverse mortgage amount, the lender must take a loss, not your heirs.  Federal laws regulate this.  Your heirs won’t have to deal with even a penny of your debt, keeping you financially independent during your life and after.

Oregon Reverse Mortgage Lenders

Many mortgage lenders in Oregon are more than willing to arrange reverse mortgage for seniors and retirees.  But you must be careful and conduct some research.  Many lenders charge high, unscrupulous fees to seniors for these loans.

Find the lender in your part of Oregon who offers the lowest mortgage rates and chares the lowest fees.  Pay close attention to each item your lender claims to charge you.  Check origination fees and closing costs from at least four or five lenders in your area to find the best deal.

If you want more information about reverse mortgages and getting started on one, read our reverse mortgage checklist.

Oregon Senior Resources

Oregon's Aging and Disability Resource Connection (ADRC) lists a number of home-based support services that enable seniors to continue living independently at home. Programs include bathing, meal, transportation, shopping, medical, and chore assistance. The aid is available statewide and more concentrated in populous areas like Eugene and Portland. 

Lenders in: Oregon.