#1 'Reverse mortgages loans are a scam'

Actually, today's  reverse mortgage loans are quite viable instruments and the FHA-insured  Home Equity Conversion Mortgage (HECM) loans are safer than ever. These  loans are unique because payment of the balance is deferred until the  last eligible borrower or non-borrowing spouse leaves the home and often  the sale of the house is used to pay the loan balance (see more about  the loan's non-recourse feature under #5). 

A reverse mortgage loan is highly regulated, just like most financial products. To qualify:

All borrowers must be 62 years or older.

The home must be the borrower's primary residence.

The borrower must have enough equity in the home to qualify.

The  borrower must undergo a financial assessment to ensure capability and  willingness to continue paying for property taxes, homeowners insurance  and home maintenance.Not be delinquent on any federal debt

#2 'A reverse mortgage loan is a loan of last resort'

Reverse  mortgage loans used to be thought of as a last-ditch effort to get cash  while retired. The truth is, while many financial products are created  for a single purpose, reverse mortgage loans are not "one size fits  all." In fact, homeowners have the flexibility to use a reverse mortgage  loan in several different ways. Here are a few:

Lump Sum: One single payment to the borrower to be repaid when the loan is due

Monthly Installments: Regular payments in the amount you need for a set period of time

Line of Credit: Access the available "standby" funds when you need them

#3 " My spouse can be thrown out of home if I die."

With  a HECM reverse mortgage loan, borrowers still retain ownership of the  home as long as they continue to pay for home maintenance, property  taxes and homeowners insurance, and meet the terms of the loan. As with  any loan, including traditional mortgages, if the borrower does not  comply with loan terms, such as paying for property taxes, then the  property can be subject to foreclosure.HECM reverse mortgage  loans have safeguards that can help ensure that the borrower will be  able to fulfill the loan terms for the life of the loan. These include:

Eligible  non-borrowing spouses are allowed to remain in the home after the  borrower of a HECM reverse mortgage loan passes away, as long as the  spouse also meets the conditions of the loan.

The loan is a  non-recourse loan, meaning the lender cannot collect more than the value  of the home and the home is the only asset that can be used as  collateral.

Prior to submitting an application, prospective  borrowers are required to undergo independent third-party reverse  mortgage counseling to ensure they understand the fine print, what they  can expect throughout the loan process, what their responsibilities are  and what other options might be


FHA establishes caps  on the amount of money that can be drawn during the first year of the  loan to help ensure that proceeds last as long as a borrower needs them.

#4 'Reverse mortgage loans come with expensive fees and interest'

As  with any conventional home mortgage loan, there are fees -- often  called closing costs -- that vary depending on the value of the home,  loan terms, market conditions and interest rates.Interest rates and fees are calculated based on a number of factors. Among them include:

The borrower's age

The home's value

The property's ZIP code

Any existing mortgage balance or liens

Number of expected years in the house

Life expectancy

Using  this information, a reverse mortgage professional can help determine  what the exact interest rates and associated fees are and will disclose  your interest rate and fees before the loan is finalized.

#5 'Your home has to be free and clear to qualify


According to FHA, to be eligible for a HECM reverse mortgage loan, you either need to own your home outright or  hold enough equity to pay off the balance with a reverse mortgage. The  balance you are allowed to have may vary depending on the home's value,  borrower's age, and the loan's interest rate, among other factors.One  of the most important advantages of a reverse mortgage loan is the  ability to pay off the existing mortgage and eliminate monthly mortgage  payments. Paying off existing mortgages is also required as part of the  reverse mortgage loan process. This may help free up cash that would  otherwise go toward a monthly mortgage payment, depending on the  borrower's specific situation.

#6 'The heirs will be responsible for paying back the loan'

When  the last surviving borrower or non-borrowing spouse dies, an heir or  the executor of the estate has the option to sell the property and use  the proceeds to repay the loan. In this case, the remaining proceeds  from the sale can be split among the heirs. The heirs also have the  option to repay or refinance the loan and keep the home in the family.An  important feature of the loan is that because a reverse mortgage is a  non-recourse loan, the home is the only collateral that the lender may  access to pay off the loan balance. This means if the sale of the home  does not cover the entire loan balance, then the FHA pays the  difference, not the borrower's family.

#7: 'The bank owns your home'

With  a reverse mortgage, the borrower retains ownership and the loan is  secured by a lien on the home. The borrower does not relinquish  ownership using a reverse mortgage loan, but rather, borrows against the  value of the home's equity. Just like with any other mortgage loan, as  long as you maintain the home, pay property taxes and insurance and  otherwise obey the loan's terms, you continue to own your property.Whether  you're nearing retirement with goals of supplementing income or you're  just looking for a safety net in times of financial uncertainty, a  reverse mortgage loan may help provide greater financial stability in  your retirement. 

For further questions regarding what is a reverse mortgage,are there reverse mortgage disadvantages and even greater advantages to you, please contact us anytime.