Do you lose your home with a reverse mortgage? Normaly the answer is No, but read on. With a Government Insured Reverse Mortgage you do not lose your home or sign your home over to the bank or the government. You must be over the age of 62 and this is only available to your primary residence, please view our guide for the basics.
A reverse mortgage that is insured by the FHA is designed to help seniors keep up their homes, pay property tax, and keep up with the cost of living or medical costs.
The myth that you will lose your house to the government or lose your home to the bank should be looked at, and uncovered by anyone considering a reverse mortgage.
Losing your home with a reverse mortgage, like any rumor does have some truth that should be discussed. We feel any loan officer or reverse salesperson should go over these truths to make sure the borrowers or their heirs don't lose their house.
This rumor that you lose your home, or sign your home over with a reverse mortgage is mainly from Private Reverse Mortgages that were not government insured. These were popular for people that didn't qualify for standard reverse mortgages. These loans were not; non-recourse, like a FHA reverse mortgage.
Private Reverse Mortgages did not protect the homeowners, were subject to high interest rates, and the seniors could outlive the equity in their homes and be foreclosed on. There are still private reverse mortgage banks today but not as prevelant as they were in 1980-1995. The private reverse mortgages carry higher interest rates, but do serve a purpose for jumbo properties with mortgages exceeding the HECM limits.
Another reason why people lost their homes was due to the owners leaving the home for a full year, they or their heirs didn't tell the bank what they intended to do with the property. The bank will try to contact the heirs and find out what they intend to do and get a timeline on it. Eventually the bank begins foreclosure if the heirs don't do anything or don't respond.
Upon leaving the property you or your heirs must tell the bank what you intend to do with the property within three months. After you leave for good you or your heirs will have one year, via four 3 month extensions with no payments to sell or refinance the property. It is important to let the bank know your intentions.
Customer service will try to contact you and your alternate contact if they find you have left the property for good. You are allowed to spend 6 months in your second home and can even leave for up to one year. Some heirs do nothing and eventually the bank has to foreclose.
Private Reverse Mortgages do still exist but are rare other than the Jumbo product. It is important to know the exact terms of the reverse mortgages you are being offered. Please view our powerpoint to understand how a reverse mortgage works and all of the benifits and disadvantages.
Another important reason why people are still foreclosed on is because they stop paying their property taxes or homeowners insurance. There are 3 rules that you must follow with a reverse mortgage other than occupying the property as your primary residence:
1. You must pay your property taxes.
2. You must pay your homeowners insurance.
3. You must keep up your home. Generally meaning you can't let your roof go and let the property become completely dilapidated.
Once you get familiar with the basics you should find a reputable reverse mortgage lender that can answer all of your questions. Please look at all of your options. Due to high demand and low supply for the fixed rate many lenders are pushing the fixed rate and some are only offering this one product. Please make sure you are offered 3 products and don't work with a lender that is pushing you into a certain type of loan. The decision is very important and it is your decision to make.
Due to the Frank Dodd bill many Mortgage Loan Officers or MLO's that are Brokers will push the adjustable rate standard HECM, and many Bankers will push borrowers into the fixed due to the high demand. If you encounter this please report this abuse to the NRMLA and request a quote from one of our lenders in your area as the FHA Reverse Mortgage product should always be your choice.
Make sure you are offered the Standard Fixed, Standard Adjustable, Adjustable Saver, and even the Fixed Saver options.
Keep in mind that by taking the fixed rate you have to take all of the proceeds out upon funding. If you take all the funds out you will accrue interest on all of those funds. If you don't have a good rate of return on where you put those funds, you will accrue more interest than you will offset. This is why the adjustable loan has to be looked at as a valid option as well.
We can refer you to a reputable seasoned reverse lender that will help you make this important decision. We will also be there with you every step of the way.
Obtaining a reverse mortgage is very reasonable. Please enter your information below to view an exciting and essential powerpoint guide for anyone considering a reverse mortgage right now.
Enter your information below to instantly view a current up to date Power Point of the HECM Saver Option which drastically reduces the cost of a reverse mortgage. This is a worthwhile powerpoint that will allow you to see real examples and see the benifit that financial advisors are seeing in the new HECM Saver program. Please put in accurate information if you want an exact competitve quote mailed to you.