The “Misunderstood Mortgage”: Changing the Reputation of HECM Loans
One of the biggest misconceptions about the reverse mortgage loan is that the program should just be used as a last resort. From financial planners to borrowers, many looked into the reverse mortgage loans for themselves or their clients if they were in a financial crisis.
This could not be further from the truth.
Even before the changes to the reverse mortgage loan in October, it was never meant to be used as a loan of last resort. Like any other loan, the reverse mortgage loan has financial obligations that must be adhered to. However, a borrower doesn’t have to make monthly mortgage payments on a reverse mortgage loan.
This alone already makes it wildly different from any other loan out there. In addition, the reverse mortgage is a non-recourse loan, meaning the heirs are not responsible for repayment like they would be with a home equity line of credit or a forward mortgage.
Since the changes, one of the steepest uphill battles I’ve faced is educating borrowers, financial planners, real estate agents, etc. on, not only why the reverse mortgage loan is no longer what it once was, but also why it is more advantageous for long term retirement planning.
I can empathize with those who are recently looking into the reverse mortgage loan, but still think of it as a loan of last resort. I found myself in that very position when I first started researching reverse mortgages. While the program is not as complicated as many article make it out to be, it is not a decision that should be taken lightly.
A borrower should be aware of the in’s and out’s of the program, have gone to counseling, and fully understand what is expected of them.
My confidence in the program is such that I did a reverse mortgage loans for my grandparents and they have managed to age in place comfortably during their retirement. While it may not be the right decision for every borrower, it may just be the perfect fit for others.
In addition, borrowers who are thinking of downsizing for their retirement can also do a reverse purchase, where they can buy a home and get a reverse mortgage loan in the same transaction. This process, not only allows the homeowners to live in a smaller home mortgage free, it also frees up more funds for investments.
There are many misconceptions about the reverse mortgage out there, make sure to call a licensed professional and talk about any questions or concerns you may have about getting a reverse mortgage loan. While the name might sound uncomfortable to some that know it as a loan of last resort, things could not be further from the truth.
The reverse mortgage has changed, it’s time its reputation began to change as well.
Be aware that while you cannot lose your home under normal circumstances, foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms
If you want more information on the reverse mortgage program give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.