Reverse mortgages have been around for nearly 60 year 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 perfect tool to finally move into that perfect 55 and over golf community or as a potential lifetime line of credit… or both!
- 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. 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 HUD 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.
- 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.
Additionally, if a borrower is considering a HELOC, the 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… just like when used to purchase a new home.
- 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 to have no personal guarantees on the loan,
- the line of credit feature to grow independent of the actual value of the home, and
- to be 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).
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 these benefits unavailable on “normal” first mortgages or HELOCs? Absolutely yes.
- 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 Central Florida Reverse Mortgage, 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 the HECM to:
- 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 your cash,
it can indeed be the perfect solution for you.
- 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.
As always, the above information is the tip of the iceberg in what you need to know about one of the most successful government insured (as well as non-government proprietary reverse jumbo) 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 (404-313-9785), or email firstname.lastname@example.org and find out more!
Maybe you, or someone you know, needs a similar success story but still thinks the new HUD/FHA Home Equity Conversion Mortgage is too good to be true? As with any loan product, there is always additional information to discuss. Give Richard McWhorter of Central Florida Reverse Mortgage a call, text (404-313-9785) or email (Richard@CFReverse.com) and find out why what you use to know about reverse mortgages is keeping you from one of the best and safest long term financial products on the market today.
Simply reach out to us at Central Florida Reverse Mortgage 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 (404-313-9785), or email email@example.com and find out more.
Richard W. McWhorter, NMLS 1618644, with McWhorter Mortgage, LLC, NMLS 1486483, dba Central Florida Reverse Mortgage is an independent reverse mortgage specialist and Certified Mortgage Planning Specialist® exclusively serving Florida (FL LO-44137) and Georgia (GA Mortgage Residential Licensee 57530). Follow him on LinkedIn, the Central Florida Reverse Mortgage website or contact him directly at Richard@CFReverse.com.
McWhorter Mortgage, LLC 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. McWhorter Mortgage is licensed in Florida and Georgia, call for originator recommendations in other states. This material is not from HUD or FHA and has not been approved by HUD or any government agency.