Why all the Bad Press about Reverse Mortgages in Sayville New York?

Over the years I think I’ve pretty much heard it all regarding the pros and cons of reverse mortgages in Sayville NY.  I’m continually dumbfounded by the negative perceptions surrounding this type of government insured loan designed for adults 62 or over.  Having over 25 years experience originating mortgage loans, I can confidently say these perceptions are very often misguided and wrong. The unfortunate outcome for  many senior homeowners is that they are misinformed from listening to pieces of information from people who do not understand how a reverse mortgage really works.  After hearing a bunch of incorrect information, many seniors form a negative opinion and become skeptical to take the time to understand the real benefits a HUD/FHA reverse mortgage can offer them.  In the end they are missing out on something that can truly be a life changing transaction.  Below I will address a few of the myths and truths about reverse mortgages:

• How often have you heard that reverse mortgages are expensive? The reality is there are options available today that weren’t available as recent as 3 years ago.  One new option is the upfront mortgage insurance cost has been removed.  The result is a savings of $12,500 for those of you having a home value of $625,000 or higher.  Depending on your desires and/or needs, closing costs can now also be reduced drastically.  It’s important to understand that reverse mortgages have are options and the choices are yours to make.

• The number one Reverse Mortgage misconception is that the bank holds title to the home and the bank takes the home when the borrower passes or leaves the home. I have heard things like “isn’t that the loan program where the bank pays me over time and when the money runs out they take my home”?  I'm always confused as to how this kind of misinformation gets out to the public.  Reverse mortgage borrowers own their home, the title remains in their names and there is no difference in the way title is vested.  All equity in the home is the yours or your heirs, NOT the banks.

• The idea that Reverse mortgages are expensive is a matter of perspective.  I once had a client tell me that her trusted advisor suggested that she sell her home because a reverse mortgage was too expensive.  First of all, my client didn’t want to sell and leave her home.  Second, if she would have sold her home for $450,000 and paid a 4% real estate commission, the cost of selling would have been double the cost of arranging a reverse mortgage for her.  Not only was a reverse mortgage less expensive, my client is still in her home where she is most comfortable, she has a lifetime income stream from her reverse mortgage and she never has to make a monthly mortgage payment.  To me, that’s piece of mind, and I’m really happy (so is she) that she didn’t take the advice of someone who was giving her incorrect information.  

• After years of arranging reverse mortgages, the only downside I can point out is that the loan balance grows over time because there are no payments being made on the loan and the interest is being deferred.  So, in the end there is going to be less equity in the home to pass on to ones heirs.

There are many great benefits of reverse mortgages and I could write a book on them, but that would take too long, so let me give you a few highlights: 

• Reverse mortgages are FHA insured loans. They are also non-recourse loans.  This means that neither the client nor the heirs are responsible for the reverse mortgage debt.  If, at the time of disposition of the home the debt exceeds the value of the home, then the FHA insurance kicks in.  The lender’s loan is paid off in full and there is no liability to the homeowner or to the heirs.  This is a huge benefit that most people don’t realize.

• Reverse mortgages can be customized to meet the needs of each individual client.  Borrowers can take a lump sum, set up monthly payments, setup a home equity line of credit, or choose a combination of these options.  Flexibility is the key here.  Yes, reverse mortgages are very flexible.  There is no penalty to pay off a reverse mortgage in full.  There are no restrictions on how funds are used. There are no payments to be made unless the client chooses to make one.

• Many Reverse mortgages are used to pay off an existing conventional loan, thus eliminating the monthly mortgage payment. The list goes on regarding the positive benefits of a HUD reverse mortgage.  Oh, and did I mention that qualifying for a reverse mortgage is not credit score or income based?  The amount that a client is eligible for is based on age, current interest rates and the value of the home.

President Reagan signed this program into law back in 1988 and the first HUD insured reverse mortgage was made in 1989.  Since that time over $800,000 reverse mortgages have been made to senior homeowners.  Don’t listen to the naysayers, find out the truth, educate yourself and then make an informed decision as to whether a reverse mortgage is right for you.  That’s the responsible way to approach a reverse mortgage loan.

I still do not understand why all the bad press about Reverse Mortgages in Sayville New York. If you or someone you care about would like to learn more and evaluate if a reverse mortgage is an appropriate solution, give me a call 631-767-8948 to setup a private in consultation.

Have a great day!!