Securing a Utah Reverse Mortgage

The Utah reverse mortgage loan is one of just a handful of loans available in the nation that allow homeowners to tap into their home equity and generate income.  Very few financial instruments allow this, at least not in an effective and secure way.  If you own a home with equity and you’re over the age of 62 in Utah, you likely qualify for this mortgage.

What is a reverse mortgage?

Reverse mortgages in Utah are offered as a unique, beneficial service to seniors and retirees who need or want to establish a steady stream of retirement income while remaining financially independent.  With this loan, your lender takes over ownership of your home equity and pays you for it in spendable cash.  You don’t have to worry about losing your home or paying the loan back.  The money is your money.

How can reverse mortgage funds be used?

You can spend the money on anything you want.  Though the goal of a reverse mortgage is to help you obtain the money you need to live comfortably and healthily, you can put the funds toward a nice vacation, a down payment on a new home, gifts for grandkids, medical costs, other debt, 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 Utah, 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 elect to receive your money in one of several possible ways.

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

Your lender owns your home equity in a reverse mortgage but not the home itself.  This should come as a relief to many homeowners who are accustomed to fearing that their home will be repossessed.  In traditional mortgages, your loan is secured by your home and can be taken over by your lender.  This is not the case with reverse mortgages.  You can continue living in your home as long as you please without paying anything back to your lender.

Does the equity need to be repaid?

The loan amount becomes due for repayment only when one of two situations arises.  The loan must be paid back when you move into a new home and sell your old one, or it must be paid back by your heirs when you pass away.

This last sentence may catch you off guard, but don’t worry.  Your heirs won’t have to come up with any money to repay your loan.  The heir that takes on ownership of your home will be required to pay back the debt owed, and this can easily be done simply by selling the home.  The lender cannot collect more money than what the home sells for. This is a federal mandate.  Your heirs won’t be affected in any way by your reverse mortgage debt.

Utah Reverse Mortgage Lenders

Reverse mortgages are readily available from multiple lenders in Utah, but you need to find the best one before you agree to take out a loan.  Each lender you contact will quote you a different mortgage rate and will want to charge you different fees.  Evaluate all your options before making a decision.

If you want to learn more about the steps involved in applying for a reverse mortgage, check out our reverse mortgage checklist or simply start contacting lenders in your area.

Utah Senior Resources

The Utah Aging and Disability Resource Connection provides a list of programs and services available to Utah seniors in order to help them live independently, especially at home. Visit the website to learn more about community aid for the elderly, whether you live in Ogden, Salt Lake City, Sandy, or beyond. Services are available statewide. 

Lenders in: Utah.