Avoid Reverse Mortgage Misinformation

reverse mortgageAnytime you make a large decision, it is important to be fully informed. The last thing you want is to take a major step only to realize it wasn’t the right move, especially when it is too late. Whether you are buying a car, deciding on a university, or buying a house, you need to move forward with as much information as possible. This is especially true when it comes to reverse mortgages. While these are immensely helpful loans for many seniors, there are many misconceptions about them everywhere you look. Unfortunately, all of these falsehoods deter many of those who could benefit from reverse mortgages, effectively robbing them of flexible, worry-free retirements. Being fully informed, however, provides you with the opportunity to fully understand these loans and make an educated decision on if one is right for you. In today’s blog, Family Home Loan Texas discusses common misconceptions about reverse mortgages and provides the truth about these helpful loans.

Understanding A Reverse Mortgage

The best way to combat misinformation about a reverse mortgage — also known as a HECM — is to have a solid grasp of the basics. They are available to those 62 or older and can be taken out on your primary residence — a home you live in for more than six months of the year. While anyone who is eligible for a reverse mortgage can apply, it typically makes the most sense if you have at least 50% equity in your home, if not more. This is because the more equity you have in your home translates to more money you will receive after paying off the rest of your mortgage. As the name indicates, with a reverse mortgage, a lender will pay you each month (or as a lump sum) rather than you paying them. A major benefit is that you will not have to pay the lender back until you move out of your home. This allows you to spend your retirement however you choose, without having to worry about your finances. 

You Are Completely In Control

A major misconception about reverse mortgages is that they are predatory and take advantage of older Americans. This is categorically false because the very first step of the process of receiving a HECM is meeting with an independent, third-party counselor that is approved by the U.S. Department of Housing and Urban Development (HUD). This is to ensure that you fully understand all aspects of the loan. This means that from the very beginning of the process, you will totally grasp what to expect from a reverse mortgage. It is in both your and the lender’s best interests that you completely understand what this loan consists of and what your obligations are. When you have all the information — from an unbiased source — you can assess your financial needs to determine if it is the best option for you. Ultimately, from the start, you have all the tools and resources to see if a reverse mortgage is right for your unique needs.

Your Heirs Can Still Inherit Your Home

When you receive a reverse mortgage loan, you keep the title to your home. This means that it is entirely yours and will continue to be until you move out or pass away. If you leave your heirs your house in your will, they will still receive it. They can then decide if they want to keep it or sell it. If they want to hold onto it, they will be responsible for paying back whatever is left on the loan. If they decide to sell it, the proceeds will first go back to paying the lender back, but they are free to keep any additional money from the sale. They, or you,  will never need to pay more than 95% of the home’s value or more than the full balance of the loan — whichever is less expensive. Any leftover amount that is owed will be covered by mortgage insurance. The big takeaway you should keep in mind is that you keep the title to your home. It is still completely yours, and you can do anything you want with it. Again, reverse mortgages are all about your freedom to spend your retirement exactly as you please.

You Will Not Lose Your Home

One of the core reasons eligible adults seek a reverse mortgage is because they can remain in their homes for as long as they like. This makes the lie that you will lose your home with a reverse mortgage particularly egregious; these loans are specifically designed to provide seniors with money while ensuring they can stay in their houses for the rest of their lives. This is why you do not have to pay any of the loan back until you cease living in your home. This is the primary selling point of a HECM, and it makes the loan an immensely helpful tool for retirees — especially those on a fixed income. Many individuals who are eligible for this loan want to stay in the home that they have been in for a long time, so the misconception that you can lose your home is incredibly off-base.

The only way you can lose your home is if you default on the loan. This only happens when the home you’ve taken out a reverse mortgage on stops being your primary residence or if you stop paying property taxes and insurance or you neglect general maintenance. It should be noted, however, that this rarely happens and is not a concern for the vast majority of HECM recipients.

Contact Us To Learn More Reverse Mortgage Facts

When you receive a reverse mortgage loan, you are completely in control from the very beginning. You are provided with ample resources and tools to help you determine if a HECM is the best move for you. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about a reverse mortgage loan and to receive a free, no-commitment consultation.