Reverse Mortgage - Very Useful and Very Misunderstood
It’s very important to dispel one common misconception about reverse mortgages. When the borrower takes out a reverse mortgage, he or she does not give up ownership of the home. As the Consumer Financial Protection Bureau points out, the borrower keeps ownership just like all other common mortgage products. Also, when the borrower passes away, the home is passed on to their heirs, NOT the bank. If the borrower wants to sell the house or just pay off the mortgage earlier, they certainly have the right just like a forward mortgage.
I really want to emphasize the above points because the ownership myth may be preventing eligible borrowers that are 62 or older from receiving much needed cash flow help.
For the right person, a reverse mortgage can be a life changing tool. A borrower will have no mortgage payments for life and if qualified, has the option of paying bills or receiving cash at closing. These benefits can significantly increase a borrower’s monthly cash flow situation. A reverse can make life more comfortable and not force the borrower to have to move or sell assets.
Due to Covid 19, many seniors are watching their retirement balances decrease and maybe even their income. A reverse mortgage saves the client from having to deplete their investments after they have already been reduced in value. Even selling a home at fair market value is a challenge right now if finances are tight. A reverse mortgage can solve these problems.
A reverse mortgage is not for everyone but great for the right borrowers. I always suggest speaking with a mortgage advisor to review all possible options to find the best fit. As far as reverse mortgages, it’s also a good idea to have an estate and will review to make sure all aspects of the borrower’s financial situation are organized.