While often misunderstood and sometimes hyped as scams - due to a rough history - a reverse mortgage loan today can actually be a life changing financial tool that's FHA insured to protect both the borrower and beneficiaries.
The beauty of an FHA Home Equity Conversion Mortgage (Reverse Mortgage) is that you don't pay back the loan because your home equity is actually paying YOU or providing a cash reserve! All you'd pay - according to the loan terms - is property taxes, homeowners insurance, and HOA fees (if applicable). When you pass on, your home's value covers the cost of the loan when your loved ones sell the home, or, if they want to keep it, they would take on a new mortgage to keep the home in the family. And...it's government backed, so if the home value isn't enough to pay off the loan when you pass on, the FHA Reverse Mortgage insurance kicks in and covers the difference - leaving no risk to your beneficiaries.
Here are some common myths and the facts about today’s reverse mortgage.
Reverse Mortgage Myths
- You immediately sign over ownership to your home.
- It’s only for broke people.
- It’s free money.
Reverse Mortgage Facts
- You retain title to your home as long as you meet the loan guidelines & requirements such as: maintaining the property, paying all property charges such as property taxes, homeowners insurance, flood insurance, and homeowners association dues (if applicable), and avoiding extended absences from the home longer than six months.*
- Many retirees use a reverse mortgage.
- It’s a specialized loan. However, program rates, fees, terms, and conditions are not available in all states and are subject to change.
- Failure to comply with the loan terms could result in a foreclosure.*
- Reverse mortgages that are FHA-insured (Home Equity Conversion Mortgages) are insured by the Federal Housing Administration providing protection for both borrowers, lenders and beneficiaries.
* There are some circumstances that will cause the loan to mature and the balance to become due and payable.* The borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable.* Credit is subject to age, income standards, credit history, and property qualifications.* Program rates, fees, terms, and conditions are not available in all states and subject to change.* Borrowers should seek professional tax advice regarding reverse mortgage proceeds.