Skip to content

Seventeen Facts About Reverse Mortgages You May Not Know.

April 30, 2011

With the many misunderstandings about reverse mortgages I want to share seventeen facts to help clear up the misconceptions.

  1. A reverse mortgage is a mortgage just like any loan against the home where the borrower is using the equity of their home to meet their needs and desires now, but with special terms for seniors 62 and older.
  2. The lender or bank does NOT own the home – YOU OWN THE HOME, you keep the title!
  3. There are no income or credit score requirements to qualify for the interest rate.
  4. No monthly mortgage payments are required.
  5. The home does not have to be free and clear or have a lot of equity.  Although enough equity is needed to pay off current liens and/or mortgages.
  6. There is no limitation on how the funds can be used.  Some common uses include paying off a current mortgage, paying for home repairs or modifications, home health care or adult day services, medical expenses, every day living expenses and even to purchase a home.  Whatever one needs or wants.
  7. More options are available than with a conventional or home equity mortgage – Funds can be received in monthly payments structured as needed, line of credit (with a growth rate), lump sum, or a combination of these.
  8. Social Security and Medicare are not affected because it is a loan, and not considered income.
  9. Medicaid (Medical Assistance in Minnesota) can still be received with the reverse mortgage.  (Your originator should know this and be able to assist you if or when you are going on Medicaid.)
  10. Borrowers can stay in the home as long as it is their primary residence or in the case of a couple as long as one borrower is still in the home as their primary residence.  The due date on the mortgage is the youngest borrower’s 150th birthday.
  11. At the time of sale if the home is sold for more than the loan balance, the borrower(s) or their heirs receive the difference.  The bank does NOT keep the difference!
  12. The loan is non-recourse which means there is no personal liability to the borrower or their heirs.  So borrowers or their heirs don’t have to come up with the difference if the loan balance is higher than what the home is sold (at fair market value).  Borrowers are not leaving a debt to their children.
  13. Just like any mortgage, borrowers are responsible for property taxes and insurance, association dues (if applicable), maintaining the property and abiding by the terms of the loan.
  14. As borrowers use the funds/equity and are not making monthly payments the loan balance increases meaning because they used the money now, there will be less available when the loan is being repaid.  (With a conventional mortgage one is using the equity but making monthly payments which repays the interest and a portion of the principal each month.)
  15. Closing costs are comparable to a conventional mortgage – even though many times they are considered expensive or high they compare to conventional loans, in fact the difference comes down to the FHA Mortgage Insurance Premium.  Fees are regulated and only HUD allowed fees are permitted with no mark-ups or junk fees.  You can see a comparison of the costs in my article, “Reverse Mortgage Costs – High or Mythical?”    Note, there are no out of pocket costs except for the appraisal.  The costs typically become part of the loan balance.
  16. FHA offers and insures through HUD the majority of reverse mortgages known as the Home Equity Conversion Mortgage or HECM, making it the most highly regulated mortgage available.
  17. HUD insuring the reverse mortgage provides advantages including:
  • Guaranteeing the funds are available for you.
  • Guaranteeing the lender against default or shortfalls
  • Keeping the interest rates lower, the interest rates have historically been lower compared to other mortgages.
  • Providing a line of credit growth rate (available only with reverse mortgages).
  • Ensuring as a reverse mortgage it is a non-recourse (no personal liability) loan.
  • Requiring counseling by a third party HUD trained and approved counselor.
  • The HECMs are highly protected.  See my Blog article “You Need To know Reverse Mortgage Borrowers Are Highly Protected.

Before dismissing a reverse mortgage as an option, know the facts and talk with a reverse mortgage expert to see if one is right for your situation.  Originators do not charge to meet with you and educate you on reverse mortgages.  No product or service is right for everyone but with the facts you can make an informed decision.

© 2011-2014 Beth Paterson https://bethsreversemortgageblog.wordpress.com 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/pxPEm-qc

Related articles:

Advertisements
63 Comments leave one →
  1. May 2, 2011 4:30 pm

    Is it true that I can buy a house with 40% down and qualify for a reverse morgage? If true, can I resell the home if necessary?

    • May 2, 2011 11:52 pm

      Yes, you can use a reverse mortgage to purchase a home. The amount of funds available from the reverse mortgage (based on one’s age, appraised home value, and expected interest rate) will determine how much down is needed. A reverse mortgage expert licensed in your state can run calculations for you and assist you. Being the title remains in the borrower’s name, they can sell the home at any time they choose.

  2. March 2, 2012 2:04 pm

    This is great information. As a home care owner I see this as a true option for people to be able to remain at home where they almost always want to be. I realize that reverse mortgages are not for everyone, but through misinformation, many clients choose to sell the house outright and move into assisted living or some other living arrangement. The problem there is not the other arrangement per se, but eliminating ‘going home’ as an option. Selling the home is so final.

  3. jan mills permalink
    January 25, 2013 7:40 am

    What does primary residence mean, I have a summer home wher I spend 4 or 5 months a year, would I qualify

    • January 25, 2013 9:26 pm

      Primary residence is where you live the majority of the year, where your drivers license is registered, it is homesteaded vs a vacation home. HUD does allow for one to be out of their home, for example in your situation where you spend time in a summer home.

Trackbacks

  1. Are You Confused on Whether to Use A Reverse Mortgage Broker, Bank Or Lender?Re « Beth's Reverse Mortgage Blog
  2. A Reverse Mortgage Should Be A Last Resort… To What? « Beth's Reverse Mortgage Blog
  3. We Are Not Chicken Littles – The Sky Is Not Falling In the Reverse Mortgage World! « Beth's Reverse Mortgage Blog
  4. Reverse Mortgages Are Expensive… Compared To What? « Beth's Reverse Mortgage Blog
  5. What Gives You A Sense of Independence? A Reverse Mortgage May Provide You These Freedoms! « Beth's Reverse Mortgage Blog
  6. Comparing Reverse Mortgage Closing Costs To A Conventional Mortgage – You’ll Be Surprised They Are Not That Different « Beth's Reverse Mortgage Blog
  7. Live in & cash Out, too – Thanks, MN Good Age « Beth's Reverse Mortgage Blog
  8. Questions About Reverse Mortgages Continue Receiving Misinformation As Responses « Beth's Reverse Mortgage Blog
  9. Facts Are Needed About The 101 year-old woman Who Did A HECM Reverse Mortgage And Was Evicted « Beth's Reverse Mortgage Blog
  10. “Our Reverse Mortgage Is Great. Gives Us Some Elbow Room.” And More Testimonies by Reverse Mortgage Borrowers « Beth's Reverse Mortgage Blog
  11. It May Be To Your Advantage To Do A Reverse Mortgage Now « Beth's Reverse Mortgage Blog
  12. You Need To Know That With A Reverse Mortgage You Remain in Control « Beth's Reverse Mortgage Blog
  13. Evaluating HECM Reverse Mortgage Payment Plan Options « Beth's Reverse Mortgage Blog
  14. Are you afraid to do a reverse mortgage? Twelve Reasons You Shouldn’t Be. « Beth's Reverse Mortgage Blog
  15. Where The Heart Is: Using Technology To Remain At Home « Beth's Reverse Mortgage Blog
  16. Eleven Statements To Listen For Indicating A Reverse Mortgage May Be Beneficial « Beth's Reverse Mortgage Blog
  17. Why Are People So Resistant to Reverse Mortgages? « Beth's Reverse Mortgage Blog
  18. Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice « Beth's Reverse Mortgage Blog
  19. Reverse Mortgages Receive Some Good PR Coverage « Beth's Reverse Mortgage Blog
  20. Reverse Mortgages Provide Independence « Beth's Reverse Mortgage Blog
  21. America’s Freedoms and Independence Represented in Fireworks « Beth's Reverse Mortgage Blog
  22. A Reverse Mortgage Can Really Be Compared To Your Smart Phone « Beth's Reverse Mortgage Blog
  23. Be Cautious on Reverse Mortgages « Beth's Reverse Mortgage Blog
  24. You Don’t Need To Have A Mortgage To Do A Reverse Mortgage « Beth's Reverse Mortgage Blog
  25. “Own Your Future Minnesota” Campaign Launched – How are you personally preparing for your long-term care needs? « Beth's Reverse Mortgage Blog
  26. Are Reverse Mortgage Property Tax Defaults Really Due To The Reverse Mortgage? …They Are Not The Only Reason Seniors Lose Their Home « Beth's Reverse Mortgage Blog
  27. Have Senior Homeowners With Reverse Mortgages And Tax Defaults Really Gone Into Foreclosure and Lost Their Homes? You Are In For A Surprise! « Beth's Reverse Mortgage Blog
  28. FHA Lending Limit for Reverse Mortgages Extended « Beth's Reverse Mortgage Blog
  29. Reverse Mortgage Features and Terms Summary « Beth's Reverse Mortgage Blog
  30. Let Me Educate You On Adjustable Rate Reverse Mortgages « Beth's Reverse Mortgage Blog
  31. Reverse Mortgage Protects Retirement Funds « Beth's Reverse Mortgage Blog
  32. Reverse Mortgage Protects Retirement Plan « Beth's Reverse Mortgage Blog
  33. The answer to the common reverse mortgage tax question « Beth's Reverse Mortgage Blog
  34. Seniors, want to purchase your new home with no monthly mortgage payments? Use A Reverse Mortgage. | Beth's Reverse Mortgage Blog
  35. You’ve Decided To Do A Reverse Mortgage… Should You Do The HECM Standard or the HECM Saver? | Beth's Reverse Mortgage Blog
  36. Change Is Inevitable and They Are Coming To Reverse Mortgages Soon | Beth's Reverse Mortgage Blog
  37. Changes Are Inevitable and They Are Coming To Reverse Mortgages Soon | Beth's Reverse Mortgage Blog
  38. Caregiver Blog |
  39. Veterans Who Have Served Our Country Have Found The Reverse Mortgage Has Served Their Needs | Beth's Reverse Mortgage Blog
  40. Without The Reverse Mortgage Money I Would Have Been “Up The Creek Without A Paddle.” | Beth's Reverse Mortgage Blog
  41. Surprise! Reverse Mortgage Closing Costs Actually Compare to Conventional Mortgage Costs | Beth's Reverse Mortgage Blog
  42. Think you don’t need a reverse mortgage? Think again… Maybe you’ll WANT one. | Beth's Reverse Mortgage Blog
  43. Know a Senior Who Wants Security, Independence, Dignity, and Control? A Reverse Mortgage May Be The Answer! | Beth's Reverse Mortgage Blog
  44. Reverse Mortgages Provide Security, Independence, Dignity And Control | Beth's Reverse Mortgage Blog
  45. Reverse Mortgage Borrowers Remain in Control | Beth's Reverse Mortgage Blog
  46. Reverse Mortgage Features and Terms Summary | Minnesota Reverse Mortgages SIDAC
  47. Think you don’t need a reverse mortgage? Think again… Maybe you’ll WANT one. | Minnesota Reverse Mortgages SIDAC
  48. Reverse Mortgage Protects Retirement Plan | Minnesota Reverse Mortgages SIDAC
  49. Veterans Who Have Served Our Country Have Found The Reverse Mortgage Has Served Their Needs | Minnesota Reverse Mortgages SIDAC
  50. You’ve Decided To Do A Reverse Mortgage… Should You Do The HECM Standard or The HECM Saver? | Minnesota Reverse Mortgages SIDAC
  51. Seniors, want to purchase your new home with no monthly mortgage payments? Use A Reverse Mortgage. | Minnesota Reverse Mortgages SIDAC
  52. The answer to the common reverse mortgage tax question | Minnesota Reverse Mortgages SIDAC
  53. FHA Lending Limit for Reverse Mortgages Extended | Minnesota Reverse Mortgages SIDAC
  54. Have Senior Homeowners With Reverse Mortgages And Tax Defaults Really Gone Into Foreclosure and Lost Their Homes? You Are In For A Surprise! | Minnesota Reverse Mortgages SIDAC
  55. Be Cautious on Reverse Mortgages… And From Whom You Are Getting Your Reverse Mortgage Information | Minnesota Reverse Mortgages SIDAC
  56. Are you afraid to do a reverse mortgage? Twelve Reasons You Shouldn’t Be. | Minnesota Reverse Mortgages SIDAC
  57. Questions About Reverse Mortgages Continue Receiving Misinformation As Responses | Minnesota Reverse Mortgages SIDAC
  58. Senior Loses Home After Listening to “Reverse Mortgages Are Bad” Advice | Minnesota Reverse Mortgages SIDAC

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: