The Reverse Mortgage Nevers
Paul Martin from Security Title Guarantee has once again provided great information for us on Reverse Mortgages. His first article, Take a Stand for Reverse Mortgages, appeared last month.
Here is the second article in his series of three. Thank you Paul!
Hope you didn’t get tired of standing during the last blog, but I wanted you to experience and personalize the value that a reverse mortgage can provide to a senior.
Today, we take a quick look at the “Nevers” of a reverse mortgage. They are:
Never Make a Payment
Borrowers can make payments if they choose, but that defeats the purpose of a reverse mortgage to tap in their home equity without having to make monthly payments. Any payment made increases the line of credit available. We will take a look at the line of credit increase and how a senior could use this to their advantage in the next blog.
Never Give up Title
“Doesn’t the bank get the house?” is a common misconception to almost everyone who considers a reverse mortgage as an option for tapping into home equity. There is the assumption that seniors sign over the Title to the lender when they close. When seniors do use a reverse mortgage to draw out equity, a lien is placed in the form of a Deed that is recorded at the county in which they live just like any other mortgage. BUT the homeowner is still the homeowner!! There is NOT a transfer of ownership since a senior still remains the Title holder.
Never owe more than the Home is Worth or Pass Debt on to the Children
I heard it just the other day. An adult child was very concerned that they would be held responsible for debt beyond the value of the home at the eventual time that their parent was no longer living in the home. Her fears were calmed when she could see in the Deed that there are NO deficiency judgements. The collateral for the loan is the home, therefore no personal liability. Even if there is a shortfall from the price the property is sold verses the balance of the loan, the debt cannot be passed on to the borrower or the estate. Most reverse mortgages are Federal Housing Administration (FHA) Home Equity Conversion Mortgages (HECM) loans. Borrowers pay an up front mortgage insurance premium and a percentage built into the interest rate to FHA for the insurance. It protects them, their heirs and the lender.
Next time…The value of the line of credit and other options for taking loan proceeds.
Paul Martin
Business Development Manager
Security Title Reverse Mortgage Division
303–889–8104
pmartin@stgco.com
