With a Reverse mortgage:
- You can purchase a new home, whether it is downsizing or rightsizing, or moving closer to family.
- An existing mortgage can be paid off to eliminate monthly mortgage payments.
- Proceeds are paid directly to the homeowner tax-free and do not affect Social Security benefits.
- Co-borrowers can include spouses, friends, siblings, or additional family members living in your household aged 62 years or older.
- A Jumbo Reverse Mortgage is available for homes that have a high property value. Qualifications are available up to a $4 million loan, with low closing costs! This can be a powerful tool when it comes to financial planning, liquidity, or retirement strategies.
Reverse mortgage risks include losing ownership of your home to the bank.
The bank does not take ownership of your home after getting a reverse mortgage; reverse mortgage borrowers maintain their ownership and title of the home. As long as you continue to honor loan terms as promised, such as paying property taxes and home insurance and occupying the home as your primary residence, you can retain ownership of your home. Keep in mind that a reverse mortgage is still secured with an interest in the home, so in the rare event that the borrower fails to comply with terms of the loan, the home may go into foreclosure.
Owing more than the home is worth is one of the dangers of reverse mortgages.
With a HECM loan, you do not owe more than the value of your home when sold. Because HECM reverse mortgages are considered non-recourse loans and are secured by federal insurance, borrowers are protected if ever their loan balance surpasses the value of their home. If this happens, their insurance will cover the difference.
One of the common pitfalls of reverse mortgages is that children and loved ones will lose all their inheritance.
When the loan reaches maturity in the future, your heirs may choose to sell the home to repay the loan. If that is the case, then they will inherit all the remaining equity of your home after the loan is repaid. Homes commonly continue to appreciate over time and often retain equity for heirs. Your family members may also choose to keep your home as inheritance, and repay the loan another way, such as refinancing into a traditional mortgage. Either way, your heirs do not lose all their inheritance.
One of the negatives of reverse mortgages is not being able to qualify because of an existing mortgage.
Even if you have an existing mortgage, you may still be eligible for a reverse mortgage as long as you have a considerable amount of equity in the home. In fact, many borrowers are attracted to reverse mortgages because the proceeds will pay off any existing mortgages as part of the loan. Thus, funds that were previously used to pay the monthly mortgage become available for other uses. Borrowers often find this feature very attractive for them because it increases their monthly cash flow.
Losing Medicare, social security, and pension benefits is one of the pitfalls of a reverse mortgage.
Your Medicare, social security, and pension benefits remain unaffected regardless of whether or not you become a reverse mortgage borrower. However, income awards such as Supplemental Security Income (SSI) may be affected, so please be sure to speak with a financial advisor prior to obtaining your loan.
Reverse mortgage loans are steadily gaining popularity for the unique and beneficial features they offer borrowers. Reverse mortgages, including government-insured Home Equity Conversion Mortgages (HECMs), are quite different than the traditional forward mortgages that many homeowners are familiar with. Lack of research and proper education about the details of a HECM reverse mortgage has resulted in misinformation in mainstream media. The reality is that the HECM reverse mortgage loan is a viable financial planning tool that has already helped more than one million homeowners ages 62 and older live more comfortably in retirement. To fully understand and appreciate the potential benefits of this product, we’ve put together a small list to separate the facts from fiction.
To learn more about reverse mortgage loans and to educate yourself on the many features and benefits this unique loan offers, contact one of our highly trained Loan Officers.