Reverse Mortgage Myths are very common. At Service First Mortgage, we’re committed to making sure you receive honest and accurate information about reverse mortgages so you can make an educated decision that’s best for you.
Here are some of the most common misconceptions about Home Equity Conversion Mortgages (HECMs)— also known as reverse mortgages— and the truth behind these myths.
“A reverse mortgage requires giving up ownership of your home.”
False. As the borrower, your name remains on the title and the home is still yours—just as it would be with any mortgage. You’re required to continue paying real estate taxes, homeowner’s insurance, and providing basic maintenance to your home. Once you no longer live in the home as your primary residence, the loan balance, including interest and fees, must be repaid.* This is usually done by the homeowner or their estate selling the house.
“A reverse mortgage should only be used as a last resort.”
False. With newer loan options that reduce up- front costs, reverse mortgages have become more versatile in recent years. Many homeowners age 62 and older are now using a reverse mortgage strategically as part of a sound financial plan.
For example, a reverse mortgage line of credit can serve as a cash reserve that you can tap as needed. (And unlike a traditional Home Equity Line of Credit, the unused reverse mortgage credit line actually grows over time.) Or, monthly advances can help you supplement other retirement income, so you can avoid withdrawing savings or liquidating invested assets. In any case, no monthly mortgage payments are required,* which can improve your cash flow and help you live more comfortably. A Branch Manager from Service First Mortgage will be pleased to work with you and your financial advisor to develop a solution that’s right for you.
“There are restrictions on how I can use the money from a reverse mortgage.”
False. How you use your reverse mortgage proceeds is up to you. Among the most common uses are paying off an existing mortgage or other debt in order to eliminate monthly debt payments; creating a cash reserve; supplementing monthly income; paying for home improvements; or covering medical bills or long-term care expenses.
“I could wind up owing more than my house is worth with a reverse mortgage, and leave my heirs with debt.”
False. A HECM (Home Equity Conversion Mortgage) reverse mortgage is insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner/heirs (if the home is sold).
“Reverse mortgages are too complicated.”
Not so. With most financial products, there are a number of factors to consider before you can choose what’s best for you. With Service First Mortgage, you can rely on your Branch Manager to be a trusted resource for clear information and responsible guidance. In addition, before you apply for a government-insured Home Equity Conversion Mortgage, you are required to receive reverse mortgage counseling from a third-party counselor who’s approved by the U.S. Department of Housing and Urban Development (HUD). These independent counselors are not affiliated with Service First Mortgage, and their only job is to ensure you fully understand every aspect of your reverse mortgage.
*If the borrower does not meet loan obligations such as taxes and insurance, and maintain the condition of the home, then the loan will need to be repaid.
To get all the facts about reverse mortgages, please contact me:
Richard Woodward, Branch Manager NMLS# 207580
Office: 214-945-1066 Cell: 972-814-3587 Fax: 214-945-106
Service First Mortgage NMLS #166487 6800 Weiskopf Avenue | Suite 200 McKinney, TX 75070
This material is not from HUD or FHA and has not been approved by HUD or any government agency.
Sec. 157.007. Disclosure Statement. A mortgage banker shall include the following notice to a residential mortgage loan applicant with an application for a residential mortgage loan: complaints regarding mortgage bankers should be sent to the Texas Department of Savings and Mortgage Lending, 2601 N. Lamar, Suite 201, Austin, TX 78705. A Toll-Free Consumer Hotline is available at 1-877-276-5550.
Figure: 7 TAC 81.200(c) “CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.