The Truth About Reverse Mortgages

The Many Misconceptions About a Reverse Mortgage

(HECM) It is amazing how the reverse mortgage has received some misguided information over the years, well I’m here to clear the air about this wonderful product for people 62 years old or older.

What is a Reverse Mortgage?

The reverse mortgage is a federally insured loan product backed by the Federal Housing Administration accessible to homeowners 62 and older. These reverse mortgage loans allow senior citizens to tap into a portion of their equity to help supplement retirement income completely TAX FREE. The best part is the borrower has NO monthly mortgage payment. The borrower(s) must maintain property taxes, insurance and maintenance of the home.

Here are some of the most common misconceptions

The bank owns your home, this is false. The borrower remains on title as the owner

My spouse can be thrown out of the house if one of us dies, once again not true. The surviving spouse still remains on title of the home and nothing will happen to the terms of the reverse mortgage

My children will get stuck with the loan and will have to start making payments or the bank will foreclose and go after the children (Heirs), The reverse mortgage is a nonrecourse loan which means the property is the ONLY collateral for the loan. When the last remaining person on the reverse mortgage dies the children or heirs have three choices:

  1. They can refinance the loan into their names
  2. They can sell the property or
  3. They can turn the keys over to the bank.

In option one and two they have initially 6 months to accomplish these choices and can be extended for more time.

A Reverse cannot be used to purchase a home, the reverse mortgage can also be used to purchase a home with at least 50% down payment and still have NO monthly mortgage payments.

Your home must be free and clear to qualify, you can actually refinance your existing mortgage into a reverse mortgage, the rule of thumb is at least 50% equity in the property.

In Closing

In closing the reverse mortgage helps hundreds of thousands of senior citizens stay in the home they love, downsize to a smaller home or simply supplement their monthly income by receiving a monthly tenure and even having a line of credit to tap into TAX FREE instead of withdrawing funds from their retirement account(s) and paying Federal and State taxes. It is best to deal with a LOCAL reverse mortgage specialist who can sit down with the clients and guide them through every step of this wonderful product. Bottom line is DO NOT be afraid of the reverse mortgage..

Written By Mike Anderson CRMS

A Quick Video on Reverse Mortgages

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