The phone rang today and on the other end was Donna, a very angry woman. She had received some marketing materials regarding Reverse Mortgages. Donna called to tell why these were such horrible loans, and that mortgage consultants like me shouldn't be writing them!
After I listened to her, I asked her if she could list for me the main reasons she thinks a reverse mortgage is so bad? This is what she said:
"Reverse mortgages are just programs that cause retired people to lose their homes. If the families can’t afford to pay the bank, then they stick the burden on their kids to pay for it. Reverse Mortgages also effect your social security checks, and for many people, that's the only source of income they have."
She listed three main misconceptions and assumptions that many make about these programs. Honestly, she couldn't be any further from the truth. This is how I explained the few points she made.
"Reverse mortgages cause retired people to lose their homes."
This is the most common myth currently out there about reverse mortgages, and it could not be more false! People say this because they are thinking about the concept of collateral. Collateral is something that applies to mortgages and home equity loans, but it does not apply to reverse mortgages in the conventional sense because reverse mortgages do not have monthly payments. The money that is loaned to you in a reverse mortgage is recouped when you pass away or sell your home; a reverse mortgage lender will never force you to sell your home while you are still living in it in order to get their money back.
"If the families cant afford to pay the bank, then they stick the burden on their kids to pay for it."
Once again, it is very much untrue. As mentioned above, the money is lent to you because of the large equity that you have in your house. The debt is never called in until you either pass away or sell your house and because you are using the money from your home to pay back the debt after your need for the home is gone, there is no way that the debt would be passed on and forced to be paid by your children.
"Reverse Mortgages also effect your social security checks." Social security benefits are based on the contributions you’ve made over your lifetime into the social security fund and therefore there is no way they can possibly go down based on the reverse mortgage should you choose to take it out. Even if you currently happen to be on an income tested benefit, the reverse mortgage is a loan. It is not income and therefore can not affect your benefit in any negative way.
The phone call didn't end with Donna asking me to take an application for her own reverse mortgage, but it did end with me getting her address to mail her some factual brochures, truthfully explaining the benefits of a Reverse Mortgage. (She didn't have a DVD player or I would of sent her a DVD too.)
These programs are great for the homeowner that is retired, happy with their lifestyle and location, but would like to use the equity in there home to have more disposable income every month.
Please contact me today if you too would like more information. There is no obligation to see what you may qualify for.
