Many folks that I first speak with mention, “I know the bank will now own my house”. Not true at all. A reverse mortgage is very similar to any other lien that is put against your home. The homeowner remains on title, and it is still your home. A reverse mortgage is an interest-bearing loan secured by the home, most compared to a home equity line of credit. Like a home equity loan, a reverse mortgage allows you to convert your home equity to cash that you can use for any purpose. Unlike other home loans, however, homeowners are not required to make monthly interest or principal payments during the life of the loan. However, borrowers can choose to make voluntary payments to principal or interest to help control the balance. Unpaid interest is added to the loan balance, which is why reverse mortgages balances go up. But HUD offers this product because the value of your home is going up as well. The hope in the end, is there is equity for you or your heirs.
My clients consider this loan for all different reasons, every scenario is different. Sometimes, it is a real-life saver! Everyone has to live somewhere, and a reverse mortgage can be another option to consider in retirement and stay in your home. A recent testimonial of a reverse mortgage customer- “The reverse mortgage has allowed me to create my “pension” plan equal to 50% of my homes equity. I have now created a situation where I can live the rest of my life without financial pressure.”
-Larry, Green Valley