Seventeen Facts About Reverse Mortgages You May Not Know.

With the many misunderstandings about reverse mortgages I want to share seventeen facts to help clear up the misconceptions.

  1. A reverse mortgage is a mortgage just like any loan against the home where the borrower is using the equity of their home to meet their needs and desires now, but with special terms for seniors 62 and older.
  2. The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title!  The lender or bank does NOT take your home when you die.
  3. Income and credit scores do not determine the interest rate. Interest rate is determined by the margin and the program chosen.
  4. No monthly mortgage payments are required.  Borrowers are responsible for paying property taxes, hazard insurance, maintaining the property, paying HOA dues if applicable.
  5. The home does not have to be free and clear or have a lot of equity.  Although enough equity is needed to pay off current liens and/or mortgages.
  6. There is no limitation on how the funds can be used.  Some common uses include paying off a current mortgage, paying for home repairs or modifications, planning for retirement, home health care or adult day services, medical expenses, every day living expenses and even to purchase a home.  Whatever one needs or wants.
  7. More options are available than with a conventional or home equity mortgage – Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
  8. Social Security and Medicare are not affected because it is a loan, and not considered income.
  9. Medicaid (Medical Assistance in Minnesota) can still be received with the reverse mortgage.  (Your originator should know this and be able to assist you if or when you are going on Medicaid.)
  10. Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence and they are abiding by the terms of the loan.  The due date on the mortgage is the youngest borrower’s 150th birthday.
  11. At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.  The bank does NOT keep the difference!
  12. The loan is non-recourse which means there is no personal liability to the borrower or their heirs.  This means borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is sold (at fair market value).  Borrowers are not leaving a debt to their children.
  13. Just like any mortgage, borrowers are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
  14. As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid.  (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.)  With the reverse mortgage, one has the flexibility to choose to make payments to reduce the loan balance, funds then become available to re-borrower in the future.
  15. Closing costs are comparable to a conventional mortgage – even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium.  Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees.  You can see a comparison of the costs in my article, “Surprise! Reverse Mortgage Closing Costs Actually Compare to Conventional Mortgage Costs”    Note, there are no out of pocket costs except for the appraisal.  The costs typically become part of the loan balance.
  16. FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available.
  17. HUD insuring the reverse mortgage provides advantages including:
  • Guaranteeing the funds are available for you.
  • Guaranteeing the lender against default or shortfalls
  • Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.
  • Providing a line of credit growth rate (available only with reverse mortgages).
  • Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan.
  • Requiring counseling by a third party HUD trained and approved counselor.
  • The HECMs are highly protected.  See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.

Before dismissing a reverse mortgage as an option, know the facts and talk with a reverse mortgage expert to see if one is right for your situation.  Originators do not charge to meet with you and educate you on reverse mortgages.  No product or service is right for everyone but with the facts you can make an informed decision.

Originally posted in 2011, updated in 2015.

© 2011-2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-qc

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

Reverse Mortgages Give Reasons For Hope

Reverse Mortgages Provide HopeAs I was reflecting on the hope that this season brings I got to thinking about the reasons the reverse mortgage gives hope to seniors.  Here are some of the reasons for hope with a reverse mortgage.  Yes, the list is long but seniors have a long list of wants and needs for hope.  With a reverse mortgage one will be able to:

  • Stay in one’s home where they may have raised their family, are familiar with the neighborhood and their neighbors and where they usually want to remain.
  • Pay off a current mortgage to eliminate the monthly mortgage payments.
  • Save one’s home when faced with foreclosure or tax forfeiture.
  • Have improved cash flow with no monthly mortgage payments.
  •  Have funds for making home improvements or home modifications.
  •  Retire and not feeling like you have to work just to have money to pay the bills.
  •  Have cash flow to be able to pay taxes.Reverse Mortgage Finances Home Health Care
  •  Have funds to pay for home health care.
  •  Have funds for some assistance with home care or companion services.
  •  Have funds for adult day services.
  •  Have funds for medical expenses and prescriptions.
  •  Afford going to the dentist.
  •  Afford new eye glasses.
  •  Have funds for the needed hearing aid.
  •  Have funds to cover long term care expenses.
  •  Cover everyday living expenses.
  •  Not rely on credit cards.
  •  Not rely on children.Reverse Mortgage Makes Grocery Shopping Easier
  •  Have funds for the little extras in life, like:
    • getting one’s hair done,
    • having cable TV,
    • buying groceries,
    • going to lunch with friends,
    • treating their children to dinner,
    • going to community plays or the theater or a concert,
    • taking the grandchildren to the zoo or a movie,
    • Depends (I had a client say with their reverse mortgage they could now afford to by Depends),
    • being able to do hobbies.Reverse Mortgage provides funds to enjoy hobby of golfing
  • Purchase a more dependable car
  • Afford transportation if one can no longer drive.
  • Afford the travel for the family wedding or reunion.
  • Take the vacation they have dreamed of all their life.
  • Protect some of their other retirement funds or investments where there might be taxes or penalties on withdrawals.
  • Purchase a new home to downsize and/or  move closer to family
  • Have funds for emergencies.
  • Reduce financial stress.
  • Have funds to full fill needs and goals.
  • To live with security, independence, dignity and control.

I have helped seniors where a reverse mortgage has fulfilled all of these reasons and more, providing hope for their future (visit the links below for some stories).  A reverse mortgage has given hope to thousands of Minnesota seniors so they can remain in their home with security, independence, dignity and control even during trying times.  If you know a senior who is looking for hope for one of the above reasons, a reverse mortgage may be their answer.

To determine if a reverse mortgage is right for one’s situation, talk with an experienced licensed reverse mortgage expert to get the facts.  Learn some of the facts at our website: www.RMSIDAC.com.  “What to Consider When Talking With Reverse Mortgage Lenders” will help you determine questions to ask when choosing your originator.

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/pxPEm-pQ

Related articles of stories on how seniors have used the reverse mortgage and how it’s made a difference in their lives:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

I’m In The Reverse Mortgage Industry Because…

Happy Reverse Mortgage ClientWe received a call the other day from the daughter of a reverse mortgage client who we had closed several years ago.  Her mother, Mildred, had been in foreclosure, in fact in this situation the sheriff’s sale had already happened.

Because credit scores and income are not required to qualify for a reverse mortgage and there were enough funds to pay off the mortgage, Mildred qualified for the reverse mortgage and we were able to save her home from foreclosure and redeem it from the sheriff’s sale.  With no monthly mortgage payments the reverse mortgage has allowed Mildred to live in her home with improved cash flow.

As she has done through the years, Mildred’s daughter was calling just to say, “hello.”  During the calls she always let us know how her mother is doing and what’s happening in her life as well.  She reported that her mother is happy that she is still able to be living in her home.  She’s doing well and now goes to adult day services to provide her some socialization.

It’s a pleasure to get these calls and hear how our clients are doing.  I’m in the reverse mortgage industry because I am able to make a difference in one’s life so they can remain in their home as they so choose.  It’s an honor to have our clients and their family members call to just say “hello” and let us know how they are doing.  Even years after the closing it’s rewarding to hear we have made a difference in their life.  I’m blessed to be in the reverse mortgage industry and help our Minnesota seniors and their families.

© 2011-2015 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-pF

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.