Wednesday, December 21, 2016

5 Myths of a Reverse Mortgage

Myths of a reverse mortgage that most people still think exist after HUD and FHA put new guidelines for the HECM programs.

You see back in the day there was something called "Private Reverse Mortgages," where a private lender would give you the equity of your home and knowing you cannot pay it back so they would pretty much steal your home from underneath your feet when the loan came due regardless if you're living in the home or not. This happened too many times to seniors so the HUD (Department of Housing Urban Development) and FHA (Federal Housing Authority) had to step in to make sure to take the necessary steps to help our seniors. This is an easy read for anyone who is interested or knows someone who is interested in eliminating their monthly mortgage payment and potentially getting cash out with the FHA insured Reverse Mortgage program also known as HECM Reverse Mortgage.


Let's get to it my friend, here are 5 myths of a Reverse Mortgage.

1. The homeowner could get forced out of the home. 

The HECM reverse mortgage was created for seniors to live in their homes for the rest of their lives without a monthly mortgage payment. You cannot be evicted or foreclosed upon as long as the borrower meets the requirements of the loan. The requirements are, continue to pay the property taxes, homeowners insurance and live there as their primary residence. Also to maintain the home according to FHA requirements

2.  A reverse mortgage is similar to a home equity loan 

A reverse mortgage and a home equity loan both use the home’s equity as collateral; however, there are also some differences. For example,

• Any homeowner can apply for a home equity loan. A homeowner must be at least age 62 to be eligible for a reverse mortgage.

• A home equity loan typically must be repaid in monthly payments over 5 or 10 years. A reverse mortgage is typically not paid back until the homeowner moves out of the property for 12 consecutive months or passes away.

• A home equity loan that charges no closing costs may have a higher interest rate over the life of the loan. A reverse mortgage charges upfront closing costs but generally has lower interest over the course of the loan.


3. You can outlive a reverse mortgage.

The reverse mortgage becomes due when all homeowners have moved out of the property for 12 consecutive months or passed away. So this gives security based upon they can't steal the home while you're still living in it, which is why it's FHA insured to make sure we take care of our seniors.

4. Heirs will not be able to inherit the home.

Your heirs will be able to inherit the home that's not a problem and the only thing I want to add is that there will be a lien on the title for the amount of the reverse mortgage loan. All proceeds beyond the amount owed belong to your estate. This means any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.

5. A reverse mortgage sells the home to the bank

Understand that lenders are not in the business or owning homes, they want to make loans and earn interest from them. The title will remain in the homeowners name. The only thing the lender does is add a lien onto the title so that it gets a guarantee that it will eventually get paid back the money it lends on the reverse mortgage.


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Jon Arpon smiling and dialing away for mortgagesFor more information on HECM Reverse Mortgages and to see if you would qualify for one my information is below. Feel free to email or call me anytime my friends!

Jon Arpon "Orange Countys Premier Mortgage Banker."
Reverse Mortgage Professional / Mortgage Banker NMLS 1447861, Company NMLS 7147
2030 Main Street, Suite 350, Irvine, CA 92614
Direct: 949.441.2048
Fax: 888.537.6148

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