Are Reverse Mortgages As Bad As They Say?

A reverse mortgage is available to seniors who are age 62 or older and currently live in a paid off, or almost paid off house. 

The Basic Steps Of A Reverse Mortgage:

The Senior Applies For A Reverse Mortgage The application for a reverse mortgage is relatively simple. A simple search on the internet will give you a number of lenders who specialize in reverse mortgages.  

Reverse Mortgages Have Several Different Payment Options

The federal government does not tax the money that is given to the borrower. With that being said, three of the most common payment methods are: – A lump sum payment (only 60% of the total lump sum can be paid in the first year) – Monthly payments based on a structured term (set number of years) – Monthly payments for life (tenure)

Reverse Mortgage Repayment Options

The reverse mortgage must be paid back in the following two situations: – When the borrower die – When the borrower moves out of the home – *the borrower is not required to pay back any of the loan if they are still alive and living in the home

When the borrower dies, there are three options: 

– The heirs must repay the loan if they want to keep the house. They can either pay the loan back or 95% of the home’s value, whichever is le – The heirs can sell the home and pay back the loan with the proceeds and keep the rest as equity – The heirs can hand over the keys to the bank and the mortgage will be considered paid in full – *the bank cannot force the heirs to repay the loan and the bank cannot force any additional estate funds to repay the loan – the home is the only collateral

If the borrower no longer lives in the home, there are three options: 

– The borrower can repay the loan either by refinancing into a traditional mortgage or by using personal savings or retirement fund – The borrower can turn over the keys to the home to the lender and the debt will be paid in full – The borrower can sell the home – *if the loan balance exceeds the home value, the borrower is only responsible to repay the amount the home sells for

When The Senior Can Be Forced Out Of Their Home

HOA fees, property taxes, insurance, etc. must still be paid by the homeowner. In the event these fees are not paid, liens can be put on the home and eventually the senior can be evicted and the home turned over to the lender. 

The Myths About Reverse Mortgages By Dave Ramsey

 Dave Ramsey Reverse Mortgage Myth #1 As stated on his website, during the term of the reverse home mortgage, “You could lose your home.”  This statement is incredibly misleading because you will not lose your home simply because you have a reverse mortgage. 

Dave Ramsey Reverse Mortgage Myth #2 Dave states, “You’ll likely owe more than your home is worth.” This statement is a half-truth intended to scare you from knowing the accurate information.  

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