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Securing a Missouri Reverse Mortgage

Any senior who lives in Missouri and wants to retire well should consider taking out a Missouri reverse mortgage.  This loan allows qualified retirees to tap the reservoir of capital held in their home equity and use it as spendable income over the course of years or decades until it is depleted.  This can provide borrowers with the income they need for retirement.

What is a reverse mortgage?

In a reverse mortgage, the lender pays equity out of your home to you in the form of cash, instead of the other way around. The amount of money you’re able to receive through your reverse mortgage is entirely dependent on how much equity you have in your home when you take out the loan.

How can reverse mortgage funds be used?

You can spend this money in a number of ways.  There are no limitations.  You can pay off debts and pay for medical expenses, or simply use the money to eliminate your mortgage payments and pay for daily living costs.  

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 Missouri, 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 arrange to receive your money in a number of ways.

  • You can get it in monthly segments over the life of the loan.
  • You can get it all right away.
  • You can get it bit by bit, as you need it, through a credit line.

Any of these choices can be combined or adjusted to meet your needs.

It’s important to mention that your lender does not gain possession of your home during a reverse mortgage.  Many seniors are unaware of this.  Your lender simply owns the equity in your home and not the home itself.  This allows you to continue living in your home without moving even after the reverse mortgage has run its course.

Does the equity need to be repaid?

Unless you move or sell the home, your heirs will be responsible for paying off the reverse mortgage debt when you pass away. Only then does the equity become due. This is typically accomplished through a sale of the home in which the proceeds are directed to your lender. If you’re afraid that your home may decrease in value, preventing your heirs from paying off the full mortgage amount, you don’t need to worry. The government has set regulations in place that scale the amount owed down to meet the amount that the home can be sold for. Your heirs won’t have to pay off any debt beyond the value of the home.

Missouri Reverse Mortgage Lenders

Your choice of lender should be determined by several things.  First, find a lender who has experience working with reverse mortgages.  These loans are unique and unlike other mortgages.  Your lender should be very familiar with the reverse mortgage process.  Second, find the lender who offers the lowest mortgage rates on the loan you want.  The rate you receive will determine how much money you’re able to access through your reverse mortgage loan.  Third, identify what fees your lender will charge.  You should consider how much it will cost just to get the loan before you decide which lender to work with.

If you take the time to conduct some research and compare these aspects, you should have no trouble finding the best lender for your loan.  Learn more about this process by reading our reverse mortgage checklist.

Missouri Senior Resources

Missouri's Department of Heath and Senior Services has a special page for independent living so that seniors may take advantage of programs that allow them to continue living at home. Programs include transportation in Columbia, Kansas City, Springfield, and  St. Louis. 

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