Reverse Mortgages have suffered from misconceptions for far too long, I’d like to dispel a few of those myths today.
What is a Reverse Mortgage? A HECM Reverse Mortgage is a federally regulated program for homeowners, aged 62 and older. It allows the equity in your home to pay you rather than you paying for the home.
H…E…C…M or HECM stands for Home Equity Conversion Mortgage. It is a federally insured and guaranteed program. The HECM Reverse Mortgage is a safe way for you to access a portion of the equity in your home without ever making a MONTHLY mortgage payment.
Why is this safe for Senior Homeowners? No matter what happens in the economy, how much money you receive, or how long you live in your home you will never be required to make a monthly mortgage payment. In addition, no matter what happens to the value of your home, you have guaranteed access to your money.
A frequent question I get is…what happens if years into the future your loan amount exceeds the value of your home? Answer, your Reverse Mortgage will continue – thanks to the FHA federal insurance. The line of credit will still be available and monthly disbursements you may have set up, will still be sent to you.
Probably the biggest misconception surrounding Reverse Mortgages is who owns my home if I take out a Reverse Mortgage? You own your home, and you remain on title, not the lender. However you do pledge the home as collateral just as you do on a traditional forward mortgage.
Furthermore, upon your passing, the home goes to your estate – not to the bank. And then your estate decides what to do with your home.
Reverse Mortgages still conjure up negative feelings for many, but today’s Reverse Mortgages are highly regulated by state and Federal laws to make them safe and to protect you!
Reverse Mortgage 101:
• You always retain title to your home
• A HECM Reverse Mortgage Loan creates more monthly cash flow
• Fees and costs are federally regulated
A Reverse Mortgage simply stated allows a Senior to use their home to stay in their home and is a tool if used responsibly that can actually enhance an overall retirement income plan.
Finally, a Reverse Mortgage should be viewed as a method for responsible retirees to create liquidity from AN OTHERWISE ill-liquid asset, which in turn can create new options that support a more efficient and enhanced retirement income strategy.