Reverse mortgages are becoming more recognized by homeowners and financial advisors as a smart and safe way to access an important retirement asset: home equity. Most reverse mortgages are government-insured Home Equity Conversion Mortgages (HECMs). You will often hear these two terms used interchangeably. This product allows people age 62 and older to purchase a new primary residence and take out a reverse mortgage in a single transaction. By doing this, they save a significant amount of money on fees and closing costs. At Service First, we’re committed to making sure you have accurate information about reverse mortgages so you can make an educated decision that’s best for you.
Let’s take a closer look at some of the most common misconceptions about reverse mortgages and the truths behind these myths.
“I will give up ownership of my home with a reverse mortgage”
FALSE – Your name remains on the title and home, just as with any mortgage. You will still be expected to pay real estate taxes, homeowner’s insurance, as well as providing necessary maintenance on our home. When you no longer live in your home for more than 12 months, the loan balance along with interest and fees must be repaid. This is usually achieved when the house/estate is sold.
“I should only use a reverse mortgage as my last resort”
FALSE – Homeowners age 62 and older are now using HECM reverse mortgages as a smart addition to their financial planning to avoid liquidating savings or assets or to defer social security until maximum income can be achieved. A reverse mortgage provides a cash reserve that can be used when needed or provides monthly advances to help supplement other retirement income. Additionally, reverse mortgages require no monthly mortgage payments which means you can improve your cash flow and live more comfortably.
“I can only use the money from a reverse mortgage in certain ways”
FALSE – How you use the money from reverse mortgages is entirely up to you. There are many ways you can use the funds including, paying off an existing mortgage or other debt, paying for home improvements, increasing cash flow, covering medical bills, and more.
“I could end up owing more than my house is worth”
FALSE – Reverse mortgages are insured by the Federal Housing Authority so you are guaranteed to never owe more than the value of your home when the loan is due. This also secures that no debt will be left to your heirs. If your loan balance is less than the market value of your home, the equity is retained by the homeowner when it’s sold.
“Reverse mortgages are too complicated”
As with any financial decision, there are a number of factors to consider to ensure you’re making the best decision for you. At Service First, our highly trained and knowledgeable loan officers will be a trusted resource to provide information and guidance. As part of the HECM reverse mortgage process, it is required that you receive reverse mortgage counseling from a third party counselor who is approved by the US Department of Housing and Urban Development. Their sole purpose is to make sure you understand every aspect of your reverse mortgage.
Ready to learn more about how a Reverse Mortgage can contribute to your financial goals? Contact one of our Loan Officers today for more information!