Learn About the Horror Stories Surrounding the HECM Reverse Mortgage.
Many of the horror stories we hear about don’t actually involve the reverse mortgage loan, but instead usually has to do with what happens to the money one received from the reverse mortgage loan. Seniors should not take everything that they hear about the program from “friends & family” to be the truth – while they may have the best intentions in helping you understand how does the reverse mortgage work – it may not translate into the truth about reverse mortgages.
what are the cons of the reverse mortgage | reverse mortgage disadvantages
1.) the reverse mortgage is a loan – this is not free money – for some reason some think that the reverse loan is free, but it is not – there are fees involved which in 2012 are very low since both interest rates are at all time lows – and the HECM Saver.
2.) for those who want to borrow the maximum amount there are some origination and closing fees which can add up – also the mortgage insurance premium which is mandatory is a bit high on the lump sum programs (for seniors with a mortgage balance this will be the only available option in the HECM programs).
3.) best used long term – so that if you are a senior who knows that they want to retire in that house then it might make more sense than if you are planning on leaving the property/sell within 5 years for example (take into considerations fees and time to compensate or break even).
4.) age restriction – you have to be 62 to qualify – we know of many 55 year young seniors who would love to utilize the program now but will have to wait until they are 62 (60 days from 62nd birthday) – this can be viewed as a negative ***there are no income or credit score requirements for a reverse mortgage loan***.
The HECM program was designed specifically for seniors who are interested in releasing a portion of their home’s equity without having to worry about making the monthly mortgage payment. The program is a Federally insured one through the Federal Housing Administration (FHA), this adds an extra layer of protection for seniors. Currently, the HECM reverse mortgage is one of the safest government insured programs on the market – what you may have heard about the program is probably a myth.
Here is a list of the top reverse mortgage myths
1. Myth: The Bank Will Own and Keep My home.
2. Myth: My kids will be responsible to pay for the mortgage
3. Myth: I will have to pay taxes on any income earned
4. Myth: I will still have to make mortgage payments or a similar payment to banks.
5. Myth: I need to own my home free and clear before taking a reverse mortgage.
6. Myth: There is the possibility of me facing foreclosure.
7. Myth: If I become too old the bank will simply kick me out of the home
8. Myth: My credit score and Income will not allow me to qualify.
9. Myth: Reverse mortgage is a scam.
10. Myth: There won’t be any equity left for my heirs.
Reverse mortgage crimes are held to high standards as they should, since the program is for seniors only the law and judges give strict verdicts to defer future criminals from performing crimes in this sector.
Long Term Annuity With Reverse Mortgage Proceeds
This is by far one of the most common stories we hear back from consumers who under they guidance of either their financial planner or their reverse mortgage lenders decided to invest some or all of their money into a long term annuity.
After or even during the loan process pay close attention to people who are already trying to sell you the next product or service. We recommend if possible for you to always speak to a tax adviser and lawyer before deciding on which option is suitable for you.
There are many people who prey on seniors that have completed the reverse mortgage program .
I thought there were no monthly payments which needed to be made?
The HECM reverse mortgage is the only program which does not require seniors to pay a mortgage payment if they qualify; BUT senior homeowners are responsible for paying the property’s insurance, taxes, and maintenance. Some lenders don’t do a good enough job of explaining this to their clients, but its critical to think about and plan for the other bills which need to be paid including the taxes and insurance.
Seniors who are not explained that they have to maintain the homes taxes/insurance/maintenance
With the reverse mortgages, seniors are still responsible to maintain the property in good condition – keep up with any taxes and insurance payments so that there is no risk of a technical default on the loan. There were some cases of seniors not being explain how the reverse mortgage works – and spending the entire amount they had received so that they fell behind and lost their homes in a short period of time. This is not normal, and it is worth noting that no matter that mortgage you take (or even if your home is paid off) the home’s property taxes and insurance are obligatory to keep paying.
There are many horror stories from seniors who have taken reverse mortgages we will update this page to give you examples & info on how you can avoid making these mistakes.