At Universal Lending, we know there are a lot of misconceptions about reverse mortgages. We remain committed to always putting our customers first. With that in mind, here are some common myths about reverse mortgages and the facts that are the foundation for this valuable financial and retirement tool.
Let’s begin with a reverse mortgage is: A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM) allows seniors age 62 and older to convert a portion of their home equity into cash. The loan requires no monthly payments and lets them retain ownership of the property. The equity built up can be paid to them. Unlike a traditional home equity loan or a second mortgage, they do not have to repay the loan until they no longer use the home as their principal residence or fail to meet the obligations of the mortgage.
How seniors use the money they receive from a reverse mortgage is up to them. The choices are limitless. So why are so many seniors hesitant to consider them? We believe it’s because seniors and their adult children simply don’t know how truly helpful these tools can be. Here are just a few of the myths surrounding reverse mortgages.
FICTION: The lender takes the title of your home.
FACT: As the borrower, your name remains on the title and you own the home, like any other mortgage. You must pay real estate taxes and homeowner’s insurance, as well as provide basic maintenance on your home. Once you no longer live in the home, the loan balance, including interest and fees, must be repaid.*
FICTION: A reverse mortgage should only be used as a last resort.
FACT: Many homeowners age 62 and older use a reverse mortgage strategically as part of a sound financial plan. For example, a reverse mortgage line of credit can serve as a cash reserve that you can tap into as needed. And unlike a traditional home equity line of credit, the unused reverse mortgage credit line actually grows over time.
Or, monthly advances can help you supplement other retirement income, so you can avoid withdrawing from savings or liquidating invested assets. In any case, no monthly mortgage payments are required,* which can improve your cash flow and help you live more comfortably.
We are here to work with you and your financial advisor as partners to develop a solution that’s right for you.
FICTION: There are restrictions on how I can use the money from a reverse mortgage.
FACT: Reverse mortgage proceeds can be used in many ways. Among the most common uses are paying off an existing mortgage or other debt, in order to have no monthly mortgage or debt payments; creating a cash reserve; supplementing monthly income; paying for home improvements; or covering medical bills or long-term care Seniors can use the money from a reverse mortgage to:
• Build an emergency fund
• Purchase long-term care insurance
• Buy a safe and reliable car
• Keep savings in a retirement fund for longer-term growth
• Stay in their own home, in their neighborhood, with their friends
• Live debt-free
• Build a cabin on a lake
• Remodel a kitchen or bathroom
• Take a well-deserved vacation
• Earn a college degree
• Have in-home healthcare so you can stay in your home.
FICTION: I could owe more than my home is worth and leave my heirs with debt.
FACT: Reverse mortgages are insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if there is a loan balance is less than the market value of the home, the additional equity is retained by the homeowners/heirs (if the home is sold).
FICTION: Reverse mortgages are for seniors with poor credit or low income.
FACT: Reverse mortgages are based on your home’s equity and your age. Income and credit are not factors.
FICTION: Reverse mortgages are for low-income seniors.
FACT: Seniors from all different income levels decide a reverse mortgage is right for them. For some seniors it is a way to eliminate their monthly mortgage payment and have more financial freedom. For others it is a way to have a financial cushion. Some seniors are able to live out their retirement more comfortably and not worry about how they will make ends meet. A reverse mortgage is not designed for one particular person; it’s for any seniors looking to make the most out of their retirement.
FICTION: Reverse mortgages are too complicated.
FACT: With most financial products, there are many factors to consider before you can choose what’s best for you. With Universal Lending, you can rely on your loan officer to be a trusted resource for clear information and responsible guidance. We want you to make the best decision for you. In addition, before you can apply for a reverse mortgage, you are required to receive reverse mortgage counseling from a third-party counselor approved by the U.S. Department of Housing and Urban Development (HUD). These counselors are not affiliated with Universal Lending. Their only job is to ensure you understand every aspect of your reverse mortgage.
If we can help you separate fact from fiction regarding reverse mortgages or any mortgage financing options, we would be honored to meet with you.
*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations then the loan will need to be repaid.