“A reverse mortgage is a way to tap into the existing equity in your home without incurring a monthly payment,” explained Santa Clarita Valley home loan officer Steve Schaefer. “Repayment is deferred until the last person on title leaves the home, sells the home, or pays off the loan in full.”

The reverse mortgage started to get a bad name because of the FHA insurance premium cost that is associated with the Home Equity Conversion Mortgage (HECM), or reverse mortgage, explained Schaefer, who has successfully handled many reverse mortgages at American Family Funding in Santa Clarita.

This upfront insurance premium cost can range from 0.5% to 2.5% of the home’s appraised value, depending upon the size of the existing balance. All existing mortgage liens on the property must first be paid by the reverse mortgage before remaining equity becomes available.

“If you own the house outright, however, the insurance isn’t as expensive at just 0.5% of the appraised value,” Schaefer said.

A reverse mortgage is a good fit for a senior who likes where he or she lives and wants to stay there, explained Schaefer, who specializes in reverse mortgages at American Family Funding. It’s especially helpful if the senior needs to supplement his or her monthly income.

“It can take the strain off of the family to supplement the elder’s income,” he said, “and it can give a senior a sense of independence.”

To qualify, the homeowner must meet the following requirements:

• Be 62 years of age or older
• The home must be your principal residence (at least 6 months and one day per year)
• Consistently pay your property taxes, homeowner’s insurance, and HOA fees, if applicable
• Adequately maintain your property

Let’s shed some light on the top three myths about reverse mortgages:

1. You have to turn your title over to the bank.

“This is not true,” Schaefer said. “You are still the owner of the house; you just have a new type of mortgage with no monthly payment.”

When a senior leaves the home to move into a long-term care facility, for example, the senior has six months to begin repaying the loan. In some cases, the senior or the estate can defer repayment for an additional six months.

2. You can outlive the loan and have to make payments.

“This also is untrue,” Schaefer explained.

The homeowner cannot outlive the loan, even if he or she lives to be 150 years old.

“As long as you meet the four requirements listed above,” Schaefer said, “you won’t outlive your reverse mortgage.”

3. The bank owns the home when you’re gone.

When the homeowner passes on, all remaining equity in the home goes to the homeowner’s heirs, contrary to the common misconception.  In addition, if the home is “upside down” when the homeowner passes, his or her heirs are protected. The FHA insurance will pay any shortfall in the mortgage repayment.

About Reverse Mortgage

This is a loan that must be repaid. Borrower(s) must be 62 years of age, are responsible for property taxes, homeowners insurance, maintenance of home, HOA dues and must be primary residence. Eligible non-borrowing spouse may be under 62. These materials are not from HUD or FHA and this document was not approved by the Department or Government Agency.

American Family Funding a Division of American Pacific Mortgage Corporation NMLS #1850

Stephen  Schaefer NMLS #950999 — Licensed By the Department of Business Oversight Under the California Residential Mortgage Lending Act.

Santa Clarita home loan lender American Family Funding can help you fulfill your dream of home ownership. A highly rated Santa Clarita mortgage lender, American Family Funding maintains a focus on community involvement and a commitment to giving back whenever possible. Friendly mortgage brokers make the first time homebuyer experience an easy and stress-free experience — even with bad credit or a low down payment. The Santa Clarita home loan officers at American Family Funding also specialize in VA loans, reverse mortgages, refinancing and the STAR Loan Program.

American Family Funding

28368 Constellation Road

Suite 398

Valencia, CA 91355

(661) 284-1150

[email protected]

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