Bloomfield Financial Services, Inc.

A reverse mortgage enables homeowners who are at least 62 years old, to convert part of the equity in their homes into tax-free income without selling the property, relinquishing the title, or assuming a new mortgage payment. The reverse mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.

Bloomfield Financial can refer you to a licensed loan-originator in your state that'll be able to assist you with a reverse mortgage.

• What are the payment options?

  You can choose to receive the money as one lump sum, fixed monthly payments (for a set term or for as long as you live in the home), as a line of credit, or a combination of these options. The most popular choice by many borrowers is the line of credit, which allows you to draw on the loan proceeds at any time.

• Do I earn interest on the unused line-of-credit (e.g., through a growth feature)?

  No, you will not not earn interest as you would with a traditional savings account. The growth factor takes into consideration that your home may appreciate in value over 12 months. The growth feature applies only to the FHA Home Equity Conversion Mortgage program.

• How much money will I receive?

  No matter which reverse mortgage product you choose, the amount of funds you are eligible to receive will depend on your age — or the age of the youngest spouse in the case of couples, appraised home value, current interest rates, and the lending limit in your area. In general, the older you are, the more valuable your home, and the less you owe on your home, increases the amount you would receive.

• Does my home qualify?

  Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, co-ops are not allowed. Only the Financial Freedom "Cash Account" program is available on co-ops in New York City.

• How may I use the proceeds from a reverse mortgage?

  The proceeds from a reverse mortgage can be used for anything: supplement retirement income; daily living expenses; home repair or upgrade (e.g., making it wheel-chair accessible); health care payments; existing debts; a new car; a vacation; property taxes; you name it!

• Are there any special requirements to get a reverse mortgage?

  If you own a home, are at least 62 years of age, and have enough equity in your home, you qualify for a reverse mortgage; there are no income or medical requirements.

• What if I have an existing mortgage?

  You may qualify for a reverse mortgage even if you still owe money on an existing mortgage; however, the reverse mortgage must be in a first lien position, so any existing mortgage must be paid in full. You can pay off the existing mortgage with the reverse mortgage or other means such as savings fund, or personal assistance from a family member or friend.

  EXAMPLE 1
  A homeowner owes $100,000 on an existing mortgage and qualifies for $125,000 under the reverse mortgage program; the homeowner would be able to pay off the entire existing mortgage with $25,000 remaining to use at his or her discretion.

  EXAMPLE 2
  A homeowner owes $100,000 on an existing mortgage and qualifies for $85,000 under the reverse mortgage program; the homeowner would contribute $15,000 from a savings fund to get the reverse mortgage. Essentially, the homeowner is relieving a $100,000 mortgage for only $15,000 and will no longer have a monthly mortgage payment.

• What is the service fee set-aside (SFSA)?

  Under most reverse mortgage programs, you will be charged a monthly service-fee that ranges from $30-$35 to manage your account. The SFSA is an estimate of what the total service fees will be over the life of the loan; the fee is calculated by multplying your life expectancy (in months) by either $30 or $35. The SFSA can total several thousand dollars which is deducted from your proceeds; you will not have access nor earn interest on the deducted fees.

• Will I lose government assistance if I get a reverse mortgage?

  A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset and could impact your Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs, you must spend all of the funds within the same calendar month; otherwise, any remaining funds in your account on the following month would count as an asset. If your total liquid assets — including other bank funds and savings bonds — exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid. To be safe, contact the local Area Agency on Aging or a Medicaid expert.

• Why do I need counseling?

  Counseling is one of the most important consumer protections built into the program; it requires an independent third-party to make sure you understand the program and review alternative options before you apply for a reverse mortgage. You can seek counseling from a local HUD-approved counseling agency or a national counseling agency such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), and Money Management International (877-908-2227).

  Counseling is required for all reverse mortgages and may be conducted in-person or by telephone. By law, a counselor must review (i) alternatives to a reverse mortgage including housing, social services, health, and financial options; (ii) home equity conversion options such as property-tax deferral programs; (iii) financial implications of entering into a reverse mortgage; (iv) impact on the borrower's eligibility for state or federal programs; and, (v) impact on the borrower's heirs or estate.

• When must I re-pay the loan?

  No monthly payments are due on a reverse mortgage while it is outstanding; the loan is repaid when you cease to occupy your home as a principal residence. If you cease to occupy the home due to death, your heirs assume responsibility for the loan.

  The outstanding balance on the loan can never exceed the property's value; furthermore, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess funds are retained by you or your estate.

• Under what circumstances should I not consider a reverse mortgage?

  A reverse mortgage may have upfront costs of several thousand dollars; if you intend to leave your home within 2-3 years, there may be less-expensive options to consider, such as home equity loans, no-interest loans, grants, or tax-deferral programs.