Have These Common Misunderstandings Kept You From Considering A Reverse Mortgage?
People get reverse mortgages for all kinds of different reasons. Some people use it as part of their overall financial plan. Others use it because they no longer want to make a monthly mortgage payment. And still others use it to create additional cash flow or pay off debts. The reasons to get a reverse mortgage are as diverse as the people getting them. Yet there are countless people that could benefit tremendously from a reverse mortgage but won’t even consider it because of common misunderstandings.
Misunderstanding: You give title to your home to the bank.
You remain fully vested on the title, not the bank. You are in full control and you decide when and if you want to sell or refinance your home, as long as it is your primary residence.
Misunderstanding: The bank gets the home when you die.
The home will go to the estate. The estate will determine what to do with the home. Any remaining equity from the sale of the home goes to the estate.
Misunderstanding: You can outlive a reverse mortgage.
There is no term on a reverse mortgage or any balloon payments. The loan is active as long as you are living and the home is your primary residence.
Misunderstanding: I could owe more than my home is worth.
You can never owe more than what your home is worth. The FHA reverse mortgage is a non-recourse loan, which means, if the loan amount exceeded the home’s value, you, your heirs or your estate are not liable. The most you can ever owe is what the home is worth.
Misunderstanding: You should only get a reverse mortgage if you are desperate.
In the past, reverse mortgages attracted the stigma that only desperate homeowners would get a reverse loan. Today’s senior homeowners are seeing the value that a reverse mortgage brings to their lives not only from a financial perspective but also in an increased quality of life.
Misunderstanding: You need to own your home free and clear in order to qualify.
You do not need to own your home free and clear in order to get a reverse mortgage. In fact, many people get a reverse mortgage to pay off their current mortgage to free up monthly cash flow.
Misunderstanding: I may lose Social Security or Medicare benefits.
A reverse mortgage does not affect Social Security or Medicare because the proceeds are a loan, not income. Some need based programs such as Medicaid may be affected.
Misunderstanding: I can’t use the money the way I want to.
It is your money and you can use it any way you see fit. You could purchase long term care or life insurance, supplement your income, pay for in home care, pay for grandchildren’s education, remodel or upgrade your home or anything else that makes sense to you.
FHA has made several changes recently to not only ensure the sustainability of the reverse mortgage program, but also to ensure the safety of seniors and their spouses. If you have questions, want to know more, are wondering how much you could borrow or are even a little bit curious, give me a call today.