||September 13th, 2007|
Reverse Mortgages . . .
with Laura Strickler
Laura Strickler -
Your Reverse Mortgage Specialist
Living in Reverse
More than ever, reverse mortgages are providing seniors an avenue to financial independence. Reverse mortgages are becoming more popular than ever. The myths that have been prevalent in the past are slowly, but surely, being replaced by facts and success stories of seniors now enjoying their golden years.
My intention with this series of columns is to educate the senior, and their family members, about reverse mortgages: to give you facts about the program in language that's understandable. I want you to know what you're talking about when the subject of reverse mortgages comes up. Most importantly, I want you to have the correct information, so that you can feel secure in whatever decision you make.
Seniors often tell me that when they mentioned looking into a reverse mortgage to a friend, the comeback went something like, "They're horrible! They'll take your house! They're too expensive! That's the worst thing I've heard about!" Those comments are based on one of the first versions of reverse mortgages, before the government got involved. Those types of loans are no longer around. Today's reverse mortgage programs are changing constantly, making improvements that only benefit seniors.
Listed below are the most common misconceptions and the reality of today's reverse mortgages:
The Lender will take my home. This is the most widely held misconception about reverse mortgages. You keep title to your home. There is a lien against your property, just like a regular mortgage. You have to maintain your property taxes and homeowner's insurance, just like a regular mortgage. You are required to live in the property. Once you pass away, your estate will sell the home, or refinance it, and pay off your reverse mortgage. But the lender doesn't just take the home once you're gone.
I won't have anything left for my kids. Many of you want to leave something to your children. That wish is usually based on the value of your largest asset, your home. The goal of the reverse mortgage lender is not to eat up all of your equity. The loan amount is much lower than your home value today, to protect against that very situation. Many adult children prefer that their parents use their home to help them stay independent, to enjoy their retirement.
I have to have good credit to qualify. Many of you are trying to eke out a living on social security. If you have a mortgage or credit card debt, it's difficult, to say the least. Your credit rating may have suffered and you're embarrassed. But don't let that stop you from freeing yourself from all of that financial stress. Your credit report is obtained by the lender, but your credit score (FICO) does not enter into the qualification process. The credit report is pulled to check for debt that must be paid, i.e. federal taxes.
I can't have an existing mortgage. You don't have to own your home free and clear. You can use a reverse mortgage to pay off an existing mortgage. Then you can use whatever is left however you wish. In some cases, the reverse mortgage amount isn't sufficient to pay off the existing mortgage. I've had many clients rid themselves of mortgage payments by combining a reverse mortgage and their own savings to pay off an existing regular mortgage.
I'm not desperate enough. Many seniors are using a reverse mortgage as a financial planning tool. You can establish a reverse mortgage line of credit and have access to an emergency fund. You can use it to purchase long term disability insurance. You can simply want a little breathing room each month. This is not a loan just for the strapped senior. It's whatever you want or need.
I hope this has helped you understand what is and isn't true about reverse mortgages. If you have other questions, please call me.
Laura Strickler, CSA
Certified Senior Advisor
Reverse Mortgage Specialist