We want to make your family mortgage loan a success and you happy.
Q1: How much money can a homeowner borrow with the Caregiver Mortgage ®?
The only limit on our Caregiver Mortgage ® is the amount the Lender is willing to lend. Our unique Reverse Mortgage calculator found on our website helps you select an amount based on a variety of factors, including:
- Value of the property
- Monthly cash-flow needs
- Loan term
Our calculator also takes into account appreciation of the property, annual cost of living adjustments, and allows you to select conservative or generous estimates for loan term and loan-to-value ratios. National Family Mortgage ® recommends that the loan amount not exceed 65% of the value of the property, but the loan to value (LTV) is ultimately up to you (although, state specific limits may apply.)
Q2: Does the Borrower qualify for a Caregiver Mortgage ® if they still have an outstanding mortgage with a bank?
Yes. The Borrower can use the Caregiver Mortgage ® income to make payments on the existing debt on the property. However, the Caregiver Mortgage ® will be registered as a subordinate, secondary lien. Some Caregiver Mortgage ® Lenders will make a large initial disbursement and actually payoff the Borrower’s existing bank mortgage!
Q3: When does the Caregiver Mortgage ® get repaid?
The line of credit becomes due and must be paid in full when one of the following conditions occur:
- The last surviving borrower sells the home.
- The term of the credit-line ends.
- The last surviving Borrower passes away (The loan must be repaid within 180 days of the death.)
Q4: What exactly gets repaid when the Caregiver Mortgage ® is over?
When any one of the above three conditions occur, the principal and outstanding interest become due to the Lender.
Please note that the homeowner can pay off the loan in cash, and is not required to transfer ownership of the property, unless the loan cannot be repaid by other means.
If the Lender does not receive repayment, the Lender then can claim a share in the property equal to the amount due from the line of credit. Any remaining equity in the property is still owned by the estate or other heirs. At that point, the exact proportion of ownership is determined by either an appraisal or a foreclosure sale.
Q5: Are there tax consequences for the Lender or Borrower?
Disbursements from a Caregiver Mortgage ® are considered a loan advance, not income, and therefore are not considered taxable by the IRS. The Lender is required to report taxable earned interest, as ordinary income, annually.
Q6: If the borrower has a Caregiver Mortgage ® and decides to apply for Medicaid do they need to worry about the mandatory 60 month “look-back” period? What about the monthly "spend down" requirement?
Medicaid, a “last-resort” government sponsored program for paying nursing home costs, requires that a nursing home resident first use their own money to pay for care before Medicaid begins providing coverage. Medicaid verifies that applicants are not simply transferring money and assets out of their estate (to family members, for example) to avoid paying for care costs themselves. Medicaid does this in part by using the “Medicaid look-back period” to determine if the applicant has violated any rules regarding the transfer of assets.
Medicaid considers or “ooks back” over the previous five years to see if the applicant sold any assets for less than true value, given away or otherwise transferred assets within the same time period, when determining eligibility for Medicaid coverage. Like Supplemental Security Income (SSI), Medicaid requires recipients to have no more than $2,000 in countable assets one day out of the month. If an individual on Medicaid receives a lump sum payment from a reverse mortgage loan and does not spend all of it in the month in which it is received, the individual may no longer be eligible to receive Medicaid because any amount retained the month after receipt counts as a resource to be applied towards the recipient's $2,000 asset limit and could affect SSI or Medicaid coverage. If large lump sum disbursements have been made and are sitting in the Borrower's bank account, Medicaid requires use of available cash funds on long-term care before they can qualify for Medicaid assistance.
Like SSI, Medicaid, also has income restrictions. However, a reverse mortgage is not considered income, so payments should not affect the recipient's income eligibility requirement.
Under the Deficit Reduction Act of 2005 (DRA), principal residences may be deemed non-countable only to the extent the applicant's equity is less than $688,000 (in 2023), with the states having the option of raising this limit to $1,033,000 (in 2023).
National Family Mortgage ® encourages you to discuss your particular situation with your trusted estate planner, financial advisor, or tax professional to help determine the best strategy to meet your family’s financial needs, including how a reverse mortgage could affect a Borrowers eligibility for federal benefits.
Q7: What about an appraisal of the Borrower’s home?
The Caregiver Mortgage ® includes an electronic valuation based on recent comparable real estate sales in the Borrower’s area. Cautious Lender's should consider having a professional appraisal of the Borrower's home to ensure there is ample equity to protect the Lender's investment.
Q8: What about Lender’s title insurance?
We will never discourage our Lenders from taking any additional precautions that may help safeguard their investment.
We suggest that our families consult the Estate attorney or Elder attorney who will conduct the Borrower's loan closing to discuss the merits and costs of obtaining Lender's title insurance. While Lender's title insurance may not be necessary for your individual situation, at the very least, having such coverage can protect the Lender's lien position.
Q9: How do we release the Mortgage / Deed of Trust / Security Deed on the property once the loan is over?
Most of our clients pay-off their loan through the sale of their property. Typically, the closing attorney, title company, or escrow company that conducts the settlement on the sale of the property, will also prepare and file the lien release for the Family Mortgage.
If necessary, the attorney who helps settle the Borrower’s estate can also prepare and file the lien release once the loan is over.
National Family Mortgage ® does not generate or file lien releases, assignments, or loan modifications.