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Securing a Maine Reverse Mortgage

If you’re a senior or you plan to retire in the Northeast, a Maine reverse mortgage can provide you with the money you need to remain comfortable, independent, and financially secure through the best years of your life.  These mortgages operate in reverse.  Your lender borrows the full amount of your home equity from you and makes payments to you in return.  This transaction provides seniors a steady stream of residual income that can last for decades.

What is a reverse mortgage?

These reverse mortgages are specialized to assist retirees and the elderly and are available exclusively to seniors over the age of 62 who own homes with significant equity.  The lender takes ownership of the borrower’s home equity and provides spendable income to the borrower either as a lump sum or at intervals, as income.  Reverse mortgages in Maine supply income to many seniors who wouldn’t otherwise have a source of capital.

How can reverse mortgage funds be used?

You can spend the money any way you need to.  Medical costs, financial assistance for relatives and children, vacations, and day to day living are all made possible through the funds you receive through your lender.  You can even put your money into other investments or purchase another property.   

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 Maine, 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 choose the payout method you wish to follow when receiving money from your lender.  Your lender will make your funds available to you through one of the following methods.

  • In full at the closure of the loan.  This lump sum option is best for borrowers who wish to place all of their capital into some other investment, like a second home or the stock market.
  • Month to month, one payment at a time.  This method is the most common and creates a flow of primary income for many seniors.
  • Through a line of credit that allows borrowers to access the funds as they need them, without significant limitations.

You can combine any of the above options to create a flexible payout method that meets your unique personal and financial needs.  For example, you can choose to receive half the money in a lump sum up front and the other half in payments over time.  The choice is yours. 

Does the equity need to be repaid?

You don’t have to pay back your reverse mortgage loan unless you move into a new home.  If you continue living in your mortgaged home for the rest of your life, you’ll never make another mortgage payment again.  When you pass away, your heirs will have to pay back the loan amount.  This can be accomplished through a sale of the home.  Federal regulations ensure that lenders can’t try to collect more money than what the home is worth at the time of the sale.  Even if the sale of the property is less than the full amount of the reverse mortgage, your heirs won’t be stuck with any debt.  Your lender will suffer the loss.

Maine Reverse Mortgage Lenders

Once you’ve decided to pursue a reverse mortgage, the next step you’ll need to complete is finding a lender.  This can be complicated.  Reverse mortgages are simple in concept but are customizable, which makes it difficult to tell which lender offers the best terms.  Because these loans are exclusive, lenders often compete against each other for the right to close these loans.  There are many great deals available to seniors who are willing to do the research required to find them.

Each lender will charge you mortgage rates and fees.  The fees for a reverse mortgage can be heavy, but if you’re able to find a lender who offers a low fee, the benefits far outweigh the costs.  To learn more about finding lenders and applying for your loan, read our reverse mortgage checklist.

Maine Senior Resources

The state of Maine provides a senior resources site with a number of assistance programs available to help seniors continue to live independently in their own home. Services include caregiving, meals on wheels, legal aid, and more. The programs are available statewide, from York to Aroostook.

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