For nearly 30 years in the Reverse Mortgage business, I have heard the same misunderstandings about this type of mortgage. I’m not exactly sure where the myths started, but my goal here is to clear the air.
Let’s start with the Reverse Mortgage (RM) concept. It is a mortgage product, just like any mortgage product, it is a lien on a borrower’s property. A Reverse Mortgage allows homeowners who are 62 and older, access to the equity in their property, in the form of a mortgage but without a required monthly principal & interest payment.This mortgage is paid back when the home is no longer the primary residence of all borrowers. Repayment is typically done by selling the property but is not limited to this option. Unlike a conventional mortgage, the balance increase over time because there is no monthly payment. Hence the term REVERSE mortgage. The borrower(s) is responsible for paying property taxes, homeowner’s insurance, and flood insurance if required. These are the same requirements as a traditional mortgage. That brings us to Myth #1; contrary to popular belief, borrowers DO NOT give up title to their property in order to get a RM. The property will remain in their name no different than a traditional mortgage. The borrower is free to sell the property at any time after they enter into a RM or pay off the RM if they so choose.
Myth #2 is the lender will take the house in the end. No, the lender does NOT take the house. The home is still titled in the borrowers name so the borrower or their heirs will keep whatever equity is remaining after the property is sold. Alternatively, the heirs can keep the property if they have the resources to pay off the RM.
Myth #3 only people with financial hardships need a Reverse Mortgage. Actually this is no longer the case. Many borrowers enter into a Reverse Mortgage as a means to secure their retirement accounts.. Instead of drawing upon investments, which is taxed, borrowers use tax free reverse mortgage funds instead. These borrowers work closely with their financial advisor or Attorney to enhance their overall quality of their retirement plan.
Finally, Myth #4 is the property must be free and clear before entering into a Reverse mortgage.
The majority of reverse mortgages originated are used to refinance existing mortgages into a RM which then frees up the monthly principal & interest mortgage payment expense. The current with mortgage must be paid off with Reverse proceeds but if there isn’t enough, the borrower can gap the difference with their own funds to qualify.
America’s Mortgage Resource
A Professional Mortgage Firm
Alison B. Calamia
Certified Reverse Mortgage Professional
Assistant Vice President
3317 N. I-10 Service Road
Metairie, LA 70002
I am your reverse mortgage professional.
Call me today to find out if a reverse mortgage loan is right for you!