Cliffco Mortgage Knows the Facts About Reverse Mortgages
It’s a term you’ve probably heard often, but you may not really know about reverse mortgages. There’s a lot of information out there in the media or from what you may have heard from friends or relatives, but there’s also a lot of misinformation. A reverse mortgage loan, officially called a Home Equity Conversion Mortgage (HECM), allows homeowners 62 and over to tap into the equity they have in their home without having to pay taxes on the funds. Cliffco Mortgage Bankers makes all types of loans to homeowners and those seeking to buy homes. We’ve seen the misinformation about reverse mortgages and we want to let you know about 5 common myths connected to these loans.
Myth #1: Reverse Mortgages Are a Scam
Reverse mortgages are regulated and are insured by the Federal Housing Administration (FHA) and has requirements for eligibility. It’s important to make certain that a reverse mortgage is FHA insured as the FBI warns there are unscrupulous lenders out there. There’s a financial assessment to ensure, among other things, that the borrower can still pay property taxes and have sufficient equity in their home. Once the reverse mortgage is issued the borrower will no longer have to make monthly mortgage payments.
Myth #2: If You Get a Reverse Mortgage You Will Lose Title to Your House
Borrowers who get reverse mortgage loans will keep title to their house. Also, homeowners who have reverse mortgage loans retain ownership of their home as long as they meet their other obligations such as paying taxes and maintaining their insurance. If the homeowner maintains all obligations the lender can’t call in the reverse mortgage loan. Once the homeowner dies, their estate can choose to pay off the reverse mortgage or put the home up for sale.
Myth #3: Your Heirs Will Have to Pay Back the Loan
If the borrower dies, eligible spouses are allowed to keep living in the home if they can meet the conditions of the loan. After the homeowner or surviving spouse dies, heirs have the option of paying off the reverse mortgage loan or selling the house. If the equity of the home is worth more than the balance remaining on the reverse mortgage loan, the heirs may keep the remaining equity. If the sale of the home is not enough to pay off the remaining balance of the reverse mortgage, the lender has to take the loss. Other than the home, none of the estate’s assets will be touched.
Myth #4: Reverse Mortgages Are “Loans of Last Resort”
The National Council on Aging (NCOA) warns that it’s not good to make financial decisions under stress, no matter what type of loan you’re looking into. So it’s not a good idea to get a reverse mortgage in a crisis because the extra income probably won’t make a difference. And reverse mortgages aren’t just a quick cash infusion. While you can get a lump sum payment, some customers get monthly installments or a line of credit.
Myth #5: Borrowers Use Proceeds from Reverse Mortgages for Big Ticket Items
According to NCOA borrowers tend not to use the proceeds from their loans for immediate needs, or things like vacations and cars. About a third of those who have reverse mortgages use it to supplement their monthly income so they can afford to live in their home longer.
Reverse Mortgage Loans can give seniors peace of mind and add stability to their retirement lifestyle. Having access to your home’s equity can make a difference and Cliffco can make it happen. To get started, contact us today.