Once the loan application has been approved, the closing (signing) of your loan is scheduled with a title company or attorney (depending on the state). We’ll confirm the payment plan you desire (i.e. amount of fixed monthly payments, line of credit), plus any requested cash you may request to receive in a lump sum at funding. The closing documents and final figures are prepared. Closing costs are normally financed as part of the loan, but the you can pay any costs with other cash, if you choose. There are sometimes good financial reasons to pay it with cash rather than financing it. Our advisors are careful to identify and recommend options depending on your financial circumstance or recommendations from your financial planner.
Note: Reverse mortgages require signing two notes and two deeds of trust. Click here to read all about the closing documentation.
There is a limit on the amount of money that can be withdrawn in the first year. If you are eligible to withdraw $100,000, for example, you would only get $60,000, or 60 percent of that sum in year one. There are exceptions. You can withdraw a bit more if there is an existing mortgage, or other liens on the property, that exceed the 60 percent limit. These "mandatory obligations" must be paid off, but you can withdraw another 10 percent of the maximum allowable amount -- in which case that's an extra $10,000, or 10 percent of $100,000. Drawing more than 60 percent of the available amount at closing will increase the upfront mortgage insurance premium. Your advisor will discuss this with you.
In month thirteen, with a variable rate loan product, you can access as much or as little of the funds remaining in the account. Fixed rate loans allow a one-time disbursement at closing.
A reverse mortgage must be the only lien on a property. This means, in order to obtain a reverse mortgage you must pay off any existing mortgage(s) or other obligations for which a lien has been placed on the property. You can use your reverse mortgage proceeds to pay off the mortgage or other obligations.
If existing liens are identified by the closing date, payoffs are updated. The closing agent will pay off existing liens, verify taxes are paid and make sure you have a current homeowner’s insurance policy.
Before closing on a reverse mortgage, you might want to speak with your CPA or attorney in the event you are faced with a situation that can affect your taxes, Medicaid or SSI eligibility. Social Security and Medicare is not impacted at all by a reverse mortgage.
Under the best case scenario, it takes a few business days to confirm all fees and payoffs, schedule a closing date, prepare the documents and communicate to all parties involved.
Springwater Capital advisors will not push you to close, even at this stage. We know that over the course of application and underwriting that you might get second thoughts and forget why you started this in the first place. A good advisor will help you remember without putting any pressure on you.