By Matt Allen
The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your reverse loan mortgage professional.
Article #7, Are Reverse Mortgages A Scam?
Every year, thousands and thousands of seniors avoid getting a reverse mortgage because of something they saw on TV, heard on the radio, read in the newspaper or found online about reverse mortgages. Grandiose headlines, skewed reporting, poor research and inaccurate facts have taken a mortgage that does not require a monthly payment and made it into a bad thing.
Think about this. Reverse mortgages are insured by FHA, regulated by HUD and they were voted into existence by congress. How could this loan product be universally bad or a scam, especially when it was designed for retirees? Granted, our government has done some monumentally dumb things. However, our politicians are smart enough not to alienate and anger seniors for a very good reason, they vote.
Is a reverse mortgage perfect? No. Have there been some issues with it? Yes. HUD has been paying attention and improved the safety and security of this loan for seniors, as well as to ensure this product will be available to future generations. Some of the more recent changes that have occurred are requiring both spouses to be part of the transaction, limiting the amount of cash out a borrower can receive the first year, reducing the initial loan amounts and requiring borrowers to go through financial assessment to determine the willingness and ability to pay taxes and insurance.
For years the media and trusted advisors have touted that you should only get a reverse mortgage if you need one or if you have no heirs. Over the last few years a significant amount of research has been conducted by a variety of PHD’s. What their research has concluded is that using a reverse mortgage as part of the overall financial plan, is not only were better long term financial outcomes achieved, but there are several scenarios in which a larger legacy can be left for heirs.
New ideas and new ways of doing things scare people. We fear the unknown. We approach things we don’t understand or that are new to us with caution and skepticism. That is why it is easy for the media and consumers to rebuke reverse mortgages. It is much simpler to keep the status quo and make the assumption that reverse mortgages are bad or a scam than it is to take the time to investigate them.
Keep in mind that you have no personal financial responsibility for this loan. Neither the bank nor the government gets your home when you die, the home passes on to the estate and heirs. There are no monthly mortgage payments. You are only responsible to pay taxes, insurance, HOA and flood insurance, if applicable, and maintain your home. This is not a credit score driven product.
Don’t let your assumptions or poor journalism keep you from exploring your options with a reverse mortgage. These loans can have a positively massive impact on your finances that could dramatically improve your standard of living and enjoyment of life during retirement. Even if you don’t need a reverse mortgage now, it could be a really smart move to get one anyway.
Matt Allen 541-292-5423