North Dakota Reverse Mortgage Guide
Do you live in North Dakota and are trying to figure out how you’re going to make ends meet in retirement?
With record inflation taking a toll on retirement accounts and Social Security cost-of-living adjustments not really being enough to offset expenses, retirees are looking for new strategies to supplement their retirement income.
The good news is that most older Americans are homeowners, which means one viable option they have is to tap into their home equity.
Home equity can be accessed by selling the home, through a home equity loan, or a home equity line of credit (HELOC).
For those who prefer to age in place, selling the home may not be the solution they are looking for. The downside to a home equity loan and a HELOC is that they must both be paid back in the form of monthly payments.
One viable option that is exclusively available to older homeowners and does not require monthly mortgage payments is a reverse mortgage.
In this guide, we will go over what a reverse mortgage is and how it works so you are armed with the information you need to know if this unique financial product is right for you and your situation.
Understanding Reverse Mortgages
A Reverse Mortgage, specifically a Home Equity Conversion Mortgage (HECM), is a unique financial tool offered exclusively to homeowners who are 62 years of age or older. A reverse mortgage allows homeowners to borrow against the equity they’ve accumulated in their homes over the years.
Unlike a conventional mortgage or a home equity loan or home equity line of credit (HELOC) where you’re required to repay the loan in monthly installments, a reverse mortgage operates differently.
When a homeowner opts for a reverse mortgage, the loan proceeds from it initially assist in settling the conventional mortgage, if applicable. With the remainder, homeowners then have the flexibility to choose their preferred mode of disbursement: a lump sum payment, regular monthly payments, a line of credit, or a mixed approach.
No monthly payments are required to pay back a reverse mortgage like a traditional mortgage. Homeowners are still required to pay property taxes, homeowners’ insurance, and maintain the home.
The repayment is triggered only when homeowners decide to permanently move out, sell the house, or upon the unfortunate event of the last surviving homeowner’s passing.
It’s important to note that reverse mortgages are federally insured loans, backed by the Federal Housing Administration (FHA). They are also subject to regulation by the U.S. Department of Housing and Urban Development (HUD).
North Dakota Reverse Mortgage Requirements
There are specific qualifications a homeowner must meet to be eligible for a reverse mortgage. Here are the key requirements you must meet to apply for a reverse mortgage:
- At least one homeowner must be at least 62 years old.
- The home must be the primary residence of the homeowners.
- Homeowners need to have equity in the home.
- The home must be in good condition.
- The homeowners must be able to continue to pay the property taxes, homeowner’s insurance, HOA fees (if applicable), and maintain the home.
- The property must be eligible for a reverse mortgage, which includes being a single-family home, a two-to-four-unit property with the homeowners occupying one unit, an FHA-approved condominium, or an approved manufactured home.
- Prospective borrowers must complete a counseling session with a HUD-approved third-party counseling service.
The Benefits of a Reverse Mortgage
While everyone’s needs are unique, here are some common reasons why older homeowners consider getting a reverse mortgage:
Supplement Retirement Income. One of the primary benefits of a reverse mortgage is that it can provide a steady stream of income during retirement, supplementing savings, social security, or pension funds. This can help cover living expenses, unexpected medical costs, or other bills.
No Monthly Mortgage Payments. With a reverse mortgage, homeowners aren’t required to make monthly mortgage payments. However, they are still responsible for property taxes, insurance, and home maintenance costs.
Stay in Your Home. A reverse mortgage allows seniors to remain in their homes and communities as they age. This can be particularly beneficial for those who have lived in their homes for a long time and wish to stay close to family and friends.
Non-Taxable Income. The money from a reverse mortgage is considered loan proceeds and not income, so it is not subject to income tax.
Flexible Payment Options. Reverse mortgages offer flexible disbursement options. You can choose to receive the money in a lump sum, as a line of credit, in monthly installments, or a combination of these.
Home Renovations and Upgrades. A reverse mortgage not only allows homeowners a way to retire in place, but it also can provide funds for those much-needed upgrades.
Enhance Retirement Plan. Reverse mortgages are not only for desperate situations, but can also be beneficial as part of a retirement plan. Retirement experts say that using a reverse mortgage earlier in retirement can help alleviate financial pressure during market downturns and the untouched balance can grow, for those receiving funds as a line of credit.
Reverse Mortgages Types in North Dakota
North Dakota residents can choose from several reverse mortgage options, each designed to cater to their unique financial and personal needs.
Home Equity Conversion Mortgage (HECM)
The HECM, the most prevalent reverse mortgage, is regulated by the U.S. Department of Housing and Urban Development (HUD) and insured by Federal Housing Administration (FHA). Available to borrowers aged 62 and over, HECMs impose no restrictions on how funds have to be used, but they are subject to an FHA lending limit, currently capped at $1,149,825 for 2024.
Jumbo Reverse Mortgage
Jumbo loans are proprietary reverse mortgages that permit homeowners to borrow beyond the FHA’s lending limit of $1,089,300. They carry higher interest rates and are not FHA-insured, but they don’t require mortgage insurance premiums.
Reverse Mortgage for Purchase (HECM for Purchase)
This unique financial tool allows homeowners to partly fund their new home through a reverse mortgage. Coupled with a significant down payment from the sale of their previous property, older homeowners can upgrade or downsize their homes in retirement without the burden of monthly payments.
Single-Purpose Reverse Mortgages
These are less common and are sometimes referred to as property tax deferral programs or deferred payment loans. Exclusively available to senior homeowners aged 62 and over, these loans are earmarked for specific lender-approved purposes, typically for home upgrades.
Reverse Mortgage Borrower Rights in North Dakota
Given that reverse mortgages are regulated by the federal government means that North Dakota residents seeking a reverse mortgage have several key rights and protections:
Counseling: Every prospective reverse mortgage borrower is required to complete a counseling session with a HUD-approved counselor. This meeting is intended to clarify the complexities of reverse mortgages, determine its appropriateness for the borrower’s situation, discuss potential alternative solutions, and assure the borrower is making an independent, well-informed decision, free from any undue external financial influence.
Right to Rescission/Right to Cancel: Borrowers retain the right to withdraw their loan application at any point, including within three business days after signing the final loan documents.
Non-Recourse Loan: One of the defining features of reverse mortgages is their status as non-recourse loans. This stipulates that when it comes time to sell the home and repay the loan, the homeowners or their heirs will only be responsible for the outstanding loan balance or 95% of the appraised value of the home, whichever is less.
North Dakota Reverse Mortgage Calculator
If you’re considering a reverse mortgage, you may want to get an idea of how much you’ll be able to borrow before making a decision. Our Reverse Mortgage Calculator can provide an estimate.
By entering some basic information into the calculator, it provides an estimate of the potential loan amount. However, bear in mind that this figure is purely an estimate and may not reflect the exact amount you would receive.
For a more accurate estimate, we strongly recommend consulting with a reverse mortgage loan officer. They can provide a thorough evaluation based on your situation.
North Dakota Reverse Mortgage Loan Application Process
Navigating the reverse mortgage application process can be complex, but it doesn’t have to be overwhelming. It’s important to note that the application process can take approximately 45 days to complete.
At Mutual of Omaha Mortgage, our devoted team is here to facilitate your journey, offering guidance at each stage to ensure a smooth and hassle-free experience.
If you opt to explore a reverse mortgage with Mutual of Omaha Mortgage, here’s a snapshot of what to anticipate:
Step 1: Initial Consultation with a Reverse Mortgage Loan Officer
Our skilled reverse mortgage loan advisors, licensed in North Dakota, will conduct a personalized assessment, estimate potential advantages, outline various reverse mortgage alternatives, and address any inquiries you may have.
Step 2: Counseling Session
Reverse mortgage applicants are required to meet with a HUD-approved third-party counselor who will guide them through an educational session. The purpose of this session is to equip you with an understanding of a reverse mortgage and other alternatives at your disposal. Upon completion, you’ll receive a certificate that you will need to present to your loan officer before officially proceeding with the reverse mortgage application.
Step 3: Submit the Application
Once you have the counseling certificate, your reverse mortgage loan advisor will aid you in submitting the application and collecting the required documentation such as a photo ID, homeowner’s insurance policy, and property tax bill. By efficiently gathering these documents, we can expedite the loan closure process.
Step 4: Appraisal and Information Compilation
Upon your application’s submission, Mutual of Omaha Mortgage will order a home appraisal to assess the condition and market value of your property. The appraisal helps calculate the eligible loan amount. We will also order the title and credit report at this time. This step typically takes about one to two weeks.
Step 5: Processing and Underwriting
With your application and documentation in place, our team will kickstart the manual underwriting process. The underwriter verifies that all reverse mortgage prerequisites are met and approves the loan. Occasionally, additional documentation or home repairs may be necessitated before the loan can be finalized. Your reverse mortgage loan advisor will keep you updated about any required actions.
Step 6: Closing
After your application’s approval, a closing date is scheduled. You get the choice to sign the closing documents either at your convenience at home with a mobile notary service or in person at the title company.
Step 7: Disbursement of Funds
After signing the closing documents, there is a mandatory three-business-day waiting period before the funds are disbursed. The disbursement method chosen during the application process will dictate how you receive the funds.
Find a North Dakota Reverse Mortgage Loan Office in Your Area
Mutual of Omaha Mortgage is a licensed Reverse Mortgage lender in the state of North Dakota. You can get started by calling 800-578-0283 or filling out this form here.
You can also find North Dakota Reverse Mortgage loan officers in your area through our loan officer directory or by clicking on one of the links below to find a loan officer near you:
- Fargo Reverse Mortgage Lender Near Me
- Bismark Reverse Mortgage Lender Near Me
- Grand Forks Reverse Mortgage Lender Near Me
- West Fargo Reverse Mortgage Lender Near Me
- Minot Reverse Mortgage Lender Near Me
- Williston Reverse Mortgage Lender Near Me
- Dickinson Reverse Mortgage Lender Near Me
- Mandan Reverse Mortgage Lender Near Me
- Jamestown Reverse Mortgage Lender Near Me
Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.