Reverse mortgage. Very useful and very misunderstood

Reverse mortgage. Very useful and very misunderstood

It’s very important to dispel one common misconception about the reverse mortgage. When the borrower takes out a reverse mortgage, he or she does not give up ownership of the home. As the Consumer Financial Protection Bureau points out, the borrower keeps ownership just like all other common mortgage products. Also, when the borrower dies, the home is passed on to his or her heirs, NOT the bank. If the borrower wants to sell the house or just pay off the mortgage earlier, they certainly have the right just like a forward mortgage.

I really want to emphasize the above points because the ownership myth may be preventing eligible borrowers that are 62 or older from receiving much-needed cash-flow help. For the right person, a reverse mortgage can be a life-changing tool. A borrower will have no mortgage payments for life and, if qualified, has the option of paying bills or receiving cash at closing. These benefits can significantly increase a borrower’s monthly cash flow. A reverse mortgage can make life more comfortable and not force the borrower to have to move or sell assets.

Because of COVID-19, many seniors are watching their retirement balances decrease, and maybe their income as well. A reverse mortgage saves the client from having to deplete their investments after they have already been reduced in value. Even selling a home at fair market value is a challenge right now if finances are tight. A reverse mortgage can solve these problems.

Reverse mortgage are not for everyone but great for the right borrowers. I always suggest speaking with a reverse mortgage advisor to review all possible options to find the best fit. With a reverse mortgage, it’s also a good idea to have an estate and will review to make sure all aspects of the borrower’s financial situation are organized.

Written by Paul Baltrun, President of Key One Capital Mortgage.