Reverse Mortgage Myth Buster #4
Another misconception I hear a lot is…the idea that a Reverse Mortgage is expensive…well…here’s the truth. The basic costs of a Reverse Mortgage really aren’t that different than a traditional forward mortgage, i.e. there are title and appraisal costs, and typically an origination fee.
The additional expense of a HECM reverse mortgage comes in the form of the FHA mortgage insurance premiums. These insurance premiums add costs to the loan but provide specific protections to the homeowner and their estate. They allow for the homeowner to live in their property for the rest of their lives and guarantee that they will never owe more than the value of their home. So while these premiums are the “cost of doing business” for this federally insured loan, the payoffs can be huge when the senior homeowner never again has to make a monthly mortgage payment.
So bottom-line, these FHA insurance premiums do add some additional costs to the loan but in my opinion if you stay in the property for 2 years or longer your monthly cash flow savings and/or ability to access tax free money more than offsets the initial costs of this loan. A well-used HECM reverse mortgage allows the senior homeowner to age in place and can create much needed monthly cash flow and/or give access to additional funds to be used for almost any reason. This may be the financial peace of mind that you have been looking for.