Because so many Americans over the age of 62 are facing significant financial stress due to dropping retirement and savings account balances, as well as higher healthcare costs, many groups are targeting seniors under the guise of helping them. HECM (home equity conversion mortgage) reverse mortgages are Federal Housing Administration-insured products and are heavily scrutinized by regulators and legislators looking to protect seniors’ best interests.
As a result, more than 600,000 American seniors have obtained reverse mortgages that have enriched their lives by allowing them to stay in their homes and pay off their bills.
Myth: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. As long as the house is maintained and property taxes and homeowners insurance are paid, the loan cannot be called due.
Myth: My children will be responsible for the repayment of the loan.
Fact: False. Reverse mortgages are non-recourse loans. That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house. If the homeowner’s heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.
Myth: I can’t get a reverse mortgage if I have an existing mortgage.
Fact: False. With enough equity, you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason most seniors take out a reverse mortgage.
Myth: Only low-income seniors get reverse mortgages.
Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.
Myth: If I outlive my life expectancy, the lender will evict me.
Fact: False. Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines.
Patty's Top Picks:
51410 PARTINGTON RIDGE ROAD, Big Sur MLS: 81039421 DOM: 7 Beds:3 Baths:3 $2,950,000
A dream home on the Big Sur coast. Huge ocean & south coast views. New kitchen appliances, Miele dishwasher, Jenn Air range, 2 fireplaces, outdoor hot tub. Mature redwoods, oaks & madrones. Plans for pool & guest house addition. SqFt: 1,650 Lot Size: 5-7 acres
301 PASADERA COURT, Salinas Monterey Highway MLS #: 81040083 $2,948,000 DOM: 4 Beds: 4 Baths: 5 (4/1)
Stunning single story custom home at Pasadera Country Club. Located on the 2nd green, this home boasts 4 large bedrooms all with walk in closets and en-suite bathrooms, a library w/ beautiful built-ins, a gourmet kitchen that will leave you breathless and views that are beyond compare. Every detail has been thought of and every amenity included. SqFt: 4,484 Lot Size: 43,560
9 ANTELOPE LANE, Monterey MLS #: 81039457
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Truly beautiful home with hardwood floors, updated kitchen with granite, stainless, maple cabinets. Separate family room with fireplace. Very large flat rear yard with patio, deck, lots of grass and it backs onto greenbelt. Complete window replacement and new roof within the last several years. Big master with updated bath. SqFt: 2,461 Lot Size: 9,147
3020 VERA LANE, Marina/ MLS #: 81040592
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Newer home in good condition on a corner lot. Nice size yard. SqFt: 2,035 Lot Size: 8,398 Sqft
(c) KRXA Radio Show, Patty Ross, 8-20-10
831-236-4513
pattyross@kw.com
www.pattyrosscarmel.com
1 comment:
Hey Patty,
Very informative post! :-)
A lot of people have misconceptions about reverse mortgage. As a result, the senior citizens avoid taking out such a loan on their property. Apart from the myths that you’ve mentioned, there are some more myths which influences the decision of the seniors to not take a reverse mortgage.
Senior citizens believe that there are no advisers available who can guide them and help them decide whether or not a reverse mortgage suits their needs. However, this is false. There are 3rd party counselors available who are approved by the HUD. Seniors citizens can contact them to take the right decision.
Many seniors believe that reverse mortgage lenders take advantage of the seniors. However, this is not fully true. Seniors should work with those lenders who are accredited by Better Business Bureau and are a member of National Reverse Mortgage Lenders Association (NRMLA). This will help them avoid reverse mortgage scams
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