What do you know about Reverse Mortgages?

For a lot of people Reverse Mortgages are something they’ve either never heard of or are very unfamiliar with–so let’s break this program down!

What’s the Difference between a Reverse Mortgage and a HECM (Home Equity Conversion Mortgage)?

-HECM is backed by FHA/HUD with multiple safeguards in place to protect our seniors. Since it is backed by HUD, the closing cost and rates are far better.

-Non-HECM Reverse Mortgages are private portfolio loans offered by various companies. Since there is no backing, these loans will have higher rates and fees to account for risks.

What is a Reverse Mortage/HECM then?

-Reverse mortgages/HECM convert a percentage of a home’s equity into cash and/or a line of credit for borrowers aged 62 and older.

-Doesn’t need to be repaid until all borrowers pass away or leave the property. Can be repaid through the sale of the property or other assets. Once the loan is repaid, any remaining equity belongs to the homeowners or their heirs.

Common Myths and Questions

Myth #1: A bank or lender can take my home at any time. Truth: the home is yours! The lender cannot take your home.

Myth #2: My heirs will be responsible for repaying the loan if the loan balance exceeds the value. Truth: No debt is passed along to heirs with no personal liability.

Myth #3: When I pass or leave my property, all proceeds will go straight to the bank. Truth: because the home is yours, any proceeds after the mortgage is paid off will go to you or your estate.

Myth #4: I won’t be able to leave the home to my kids. Truth: family members may obtain a short pay off for 95% of the current home value with a post death transfer.

Myth #5: I won’t qualify because my home isn’t owned free and clear. Truth: the reverse mortgage is determined by the amount of equity in the home, not if it’s paid off.

Myth #6: I hear a lot of people default on these loans and get foreclosed on. Truth: the loan does not require to make a mortgage payment. In the event of the home being worth less than what is owed AND the borrower(s) pass away or moves out permanently the heirs can either turn the home over to the bank or purchase the home for 95% of what is owed, the HECM is a non-recourse loan!

Myth #7: I’m afraid my spouse will be kicked out of the home if I pass or get moved to a nursing home. Truth: your spouse will not be kicked out of the home if you pass away or get moved to a nursing home.

Myth #8: I can’t qualify because my spouse is under the age of 62. Truth: if your spouse is non-borrowing, its okay for them to be under the age of 62.

Myth #9: These loans are only for desperate people in desperate situations. Truth: these loans can be a great investment strategy to increase retirement success.

Myth #10: I’m still required to make monthly payments. Truth: while you are allowed to make monthly payments, they are not required. Property taxes, insurance and HOA dues are still required to be paid, as well as the borrower must be able to maintain the property.

Please reach out to us so we can go over your options and walk you through any questions you might have! Call us at: 206-590-2414