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Reverse Mortgage Myths, Or Why You May Miss One Of The Most Important Loan Products Available Today…

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Reverse mortgages have been around for nearly 60 years and, during that time, have taken their fair share of knocks…  from the unscrupulous peddlers to the lack of sufficient government oversight. Find out below how the Home Equity Conversion Mortgages (HECM), (the only HUD approved, FHA insured reverse mortgage available) has been turned into one of the safest mortgages available on the market today.

To be sure, HECMs aren’t for everyone.  But once these 5 areas are understood, you might find them the right tool to finally move into that perfect 55 and over golf community or as a potential lifetime line of credit… or both!

  1. Reverse Mortgage Myths: The Bank Will Own My Home

A Home Equity Conversion Mortgage (FHA insured reverse) is a mortgage, and a lien, like any other on a borrower’s home and the borrowers name remains on deed as owner. The lender’s only claim on your home is the balance of the mortgage itself at the end of the loan.  While HECM loan documents are nearly identical to a typical traditional mortgage, they have far more mandated protections than a typical loan provides.

In fact, with a reverse mortgage, borrowers and their heirs actually have significantly more flexibility available to them than a traditional mortgage, with the ability to take up to 12 months to sell, pay off the loan and keep all remaining equity, to turn in the keys should the loan balance exceed the value of the home, or simply pay off (or refinance) the mortgage and keep the home.

  1. Reverse Mortgage Myths: If I have a mortgage, I can’t get a reverse.

A HECM reverse is a standalone mortgage that replaces all mortgages that may be on a home. For many borrowers, one of the primary objectives is to be mortgage free, significantly improving monthly cashflow by eliminating monthly house payments. A HECM provides for that same freedom from monthly mortgage payments, and frees up a portion of that “all cash equity” to be reallocated to better long term investment.

Additionally, if a borrower is considering a HELOC, the potential benefits of a HECM become even clearer. Non-callable, regardless of the value of the home, no personal guarantees, the ability to draw on available balance for the life of the loan and the removal of the monthly obligation of making mortgage payments can be tremendously valuable alternatives for homeowners.

Special Exception:  There is a reverse second mortgage product that has been introduced by the largest reverse lender in America… the Homesafe Second.  Now, if you would like to access some of your equity without losing that super low 3% rate on your current mortgage, just reach out for  the particulars!

  1. Reverse Mortgage Myths: Reverse mortgages have large out of pocket expenses.

Reverse mortgage closing costs are included in the balance of the loan at closing and typically require very little costs out of pocket to close. While a reverse will be somewhat more expensive than a traditional mortgage, the largest single cost may well be the mortgage insurance due at closing.  But, that premium is the very reason a HECM can provide additional protections, such as allowing:

  • the borrower nor their heirs have any personal guarantees on the loan,
  • the available line of credit feature grows independent of the actual value of the home, and
  • the line of credit is non-callable and non-freezable (as long as the home is your primary residence and you remain current on taxes, insurance and other property fees as well as honoring other loan promises similar to all mortgages).

So, are they more expensive to close? Yes. Does FHA and HUD guarantee significant additional benefits made available to the borrower as a result?  Yes, again. And, finally, are all of these benefits available on “normal” first mortgages or HELOCs? Absolutely not.

  1. Reverse Mortgage Myths: I can’t leave my house to my children.

A corollary to Myth 1, above, this stems from the misconception that a reverse mortgage means the bank owns the home. The HECM is just a mortgage and, at the end of the reverse, the loan needs to be paid off like any other mortgage.  At Ridge Reverse, we encourage any interested party (whether heirs or financial professionals) to take an hour or so and sit in on the independent counseling required by HUD to ensure all parties are well versed in the true pros and cons of reverse.

This myth is yet another reason why your HECM reverse mortgage consultant should learn as much as possible about your individual needs.

While the HECM is not for everyone, if you are looking at this mortgage to help:

  • payoff existing mortgages to improve monthly cashflow,
  • augment your long term financial plan,
  • avoid relying on children for emergency spending,
  • enjoy the freedom to travel when and where you desire,
  • purchase that retirement (or next) home, or
  • any of the great reasons to have instant access to some of your cash equity in your home,

it may indeed be a solution worth considering.

  1. Reverse Mortgage Myths: Reverse mortgages are only for desperate people

It is true that, originally, reverse mortgages were considered a “loan of last resort”.  And while you can still get a reverse mortgage when no other loan is an option, it is an unfortunate reality today that if a financially strapped borrower seeks a reverse as a last lifeline, with new HUD financial assessments required many find they may no longer qualify.

The best advice? Don’t wait until desperation to learn more about the benefits of a reverse mortgage. And, to take full advantage of the Line of Credit growth factor to its fullest, the smartest move is to secure your reverse as soon as you qualify to make sure your available line grows as fast as possible during this higher interest rate environment.

As always, the above information is the tip of the iceberg in what you need to know about one of the safest loan products available.  As with any financial instrument, you should always consult the new HECM rules and protections with a trusted financial professional and an experienced reverse mortgage originator.

If you find yourself thinking a Home Equity Conversion Mortgage or proprietary reverse may be of interest, but still have more questions, feel free to call, text (863-456-7810), or email richard@amerifund.com and find out more!

Next step?

Have other questions or heard of other reasons why a HECM might not be right for you? Simply reach out to us at Ridge Reverse and let’s discuss how we can help you with a product designed specifically to meet your needs for a lifetime of happiness… while enhancing long term cashflow and quality of life. Feel free to call, text (863-456-7810), or email richard@amerifund.com and find out more.

Ridge Reverse, powered by Amerifund, provides an Equal Housing Opportunity. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to secure a loan. Some restrictions may apply. This material is not from HUD or FHA and has not been approved by HUD or any government agency.

Richard W. McWhorter, NMLS 1618644, is an independent reverse mortgage specialist and can assist in your reverse mortgage needs in most states. Follow him on LinkedIn, the Ridge Reverse website or contact him directly at richard.mcwhorter@amerifund.com.

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Licensing

Ridge Reverse
Powered by Amerifund Home Loans Inc.
NMLS #347051

Richard W. McWhorter
NMLS  #1618644

Amerifund Corporate
2655 First St. Suite #220
Simi Valley, CA 9306

Contact Us

Local Address
200 E Tillman Ave
Lake Wales, FL 33853

Number:
Office: (863) 456-7810
Mobile: (404) 313-9785

Hours:
MON-FRI 9AM - 5PM EST

Ridge Reverse powered by Amerifund NMLS #347051. Equal Opportunity Mortgage Broker. Credit on approval. Terms subject to change without notice. Not a commitment to lend. Contents not provided by, or approved by FHA, HUD or any other government agency. All potential tax benefits should be verified with a professional licensed tax advisor. NMLS Consumer Access

At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; the loan balance grows over time and interest is charged on the outstanding balance; the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; interest on a reverse mortgage is not tax deductible until the borrower makes partial or full re-payment.

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