Senior Citizen's Guide digital books
Senior Citizen's Guide to Washington County (PA)

Reverse Mortgages

Common Misperceptions
A reverse mortgage is a unique product that needs to be studied—and those who misinform often do not take the time to properly study or research it. The most commonly heard misinformation is:

Reverse mortgages are some kind of scam.
A reverse mortgage is a well thought out, very creative and highly effective solution to a societal problem—the inability of some seniors to have enough money to get through their retirement years. With people living longer than they might have anticipated and with many people’s savings diminished by the economic downturn, being able to use your home equity is one of the sources of support and comfort available.

Reverse mortgages are too good to be true.
Reverse mortgages are not a fantasy. They are by no means a trick. You worked hard to earn the equity in your home and you deserve the chance to use that money if and when you need it. There is a cost attached to a reverse mortgage, as with every loan. And there are responsibilities that come with it.

Reverse mortgages are the loan of last resort.
In some people’s cases they may be. For others they may not be. You may choose to use a reverse mortgage to help you cover your expenses while you wait for your retirement savings account to go back to their pre-recession levels. You may use it to help you through until home values recover and you can sell your home for a higher price. A reverse mortgage, like social security, medicare/Medicaid, IRs and 401Ks, is an option in a retirement toolbox—and different situations require different tools.

When you take a reverse mortgage, the bank owns your home.
 No, you continue to own your home. And when you pass on, your heirs own your home, though they must then pay back the reverse mortgage. If you are in arrears on taxes and insurance, you are in default and, to keep your home, you must work with the lender to catch up on your obligations.

Salesmen insist a senior use the loan proceeds to purchase another financial product as a condition for obtaining a reverse mortgage.
 No, this is not legal.

Reverse mortgage lenders aggressively push seniors to take the proceeds in a lump sum so they can earn interest on a high loan balance.
By law a loan originator must present all options that are available to you.

Counselors are in cahoots with the Lenders and only there to make sure you take out a reverse mortgage.
Untrue. Counselors must be independent and are tested and certified by HUD. A counselor’s responsibility is to the borrower, not the lender.

Reverse mortgages are expensive.
Reverse mortgage fees are similar to those for any other mortgage product. The one additional fee is the Mortgage Insurance Premium, which is paid to the government mortgage insurance fund to protect you in the event the loan balance grows larger than the value of your home.

Article provided by Randy Davis, NMLS # 489472, Certified Reverse Mortgage Professional at Dollar Bank, Source: National Reverse Mortgage Lenders Association.

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