What Are The Top Five Reverse Mortgage Misconceptions?

What Are The Top Five Reverse Mortgage Misconceptions

5. You cannot use a reverse mortgage to purchase a home.

4. The bank owns your home and allows you to stay in the home.

3. You can outlive the reverse mortgage.

2. Reverse mortgages are only for desperate people.

1. The bank will take your home when you die.

I put the meat of this article right up front because I know people are busy and want to get right to the point. Now that you know the answer to the to the headline question, you can be on your way…Or you can stick around for a few more minutes to understand the details.

However, before we dig in, I should briefly explain what a reverse mortgage is.  In a nutshell, a reverse mortgage is a loan specifically designed for people aged 55 and older (FHA insured reverse mortgages have a minimum age of 62), that allows you to convert a portion of the value of your home into cash that you can use however you choose.

The home stays in your name and it is your responsibility to continue to pay your property taxes and homeowners insurance as well as maintain the home and live in the home as your primary residence.  

As long as you do these things, you are never required to pay a mortgage payment, however, you are still charged interest (and mortgage insurance on the FHA insured reverse mortgage), on a monthly basis.  Since you are being charged, but not paying it, the interest is added to your loan balance.  This is what is meant by “negative amortization”.

Now that you have a brief understanding of reverse mortgages, let’s dive into the misconceptions.


#5.  You cannot use a reverse mortgage to purchase a home.  

You can use a reverse mortgage to purchase a home as long as it will be your primary residence.  You can use either the FHA insured reverse mortgage program, call the Home Equity Conversion Mortgage (HECM), or the proprietary reverse mortgage program.  Click here to learn more about this program or you can watch this two-minute video.

See mortgagee letter 2008-33 


#4.  The bank owns your home and allows you to stay in the home.

With a reverse mortgage, you continue to own the home.  You can add a room or paint it purple.  It is your home.  The reverse mortgage is just a loan against the home.  The loan becomes due and payable when the last borrower (or non-borrowing spouse) permanently leaves the home.

See HUD Handbook 4235.1 Chapter 1-2


#3.  You can outlive the reverse mortgage.

To be perfectly clear here, it is possible to outlive the money you receive from the reverse mortgage, but the actual loan does not come due until the last borrower, (or non-borrowing spouse), permanently leaves the home.   If you use all the money available to you from the reverse mortgage, but continue to live in the home and keep up with your property taxes and homeowners insurance as well as maintain the home, you can continue to stay in the home without making any monthly payment to the lender

The same rules apply if the balance on the reverse mortgage loan exceeds the value of the home (your home is underwater).  The loan cannot be called due as long as you continue to meet the obligations mentioned above. In fact, if you are underwater on the home, but still have funds in available to you on the HECM reverse mortgage, these funds cannot be closed out.  You will still have access to them.

See HUD Handbook 4235.1 Chapter 1-3 & 24 CFR 206.27(b)(8)


#2.  Reverse Mortgages are only for desperate people.

It is true that a lot of people think a reverse mortgage should only be used as a “last resort”.  Unfortunately, people who still believe this are misguided.

Today’s reverse mortgages are designed to be part of an overall, long-term financial plan that helps people maximize all their assets – including the equity in their home.  The goal of this financial plan is to relieve financial stress and help people live a comfortable, active lifestyle that meets their needs during retirement.

See HUD Handbook 4235.1 Chapter 1-2 “Purpose of the Program”


#1.  The bank will take your home when you die.

I have been battling this misconception since I started originating reverse mortgages bask in 2003, and it is as prevalent today as it was back then.  

The lender does not automatically take the home when the last borrower dies.  The reverse mortgage lender simply has a lien on the home, just like any other mortgage company does with a traditional mortgage.  The home is inherited by whomever you name in your will.  The reverse mortgage does have to be paid in full at this time, but there is a process for this and your heirs have options.

See HUD.gov – HECM Servicing FAQ &  24 CFR 206.125

My main goal as a reverse mortgage specialist is to educate people about this terrific program.  Hopefully this brief article helps to shed light upon these common misconceptions about reverse mortgages and help people to open their minds to a great way to use home equity to relieve financial stress and provide peace of mind.

Please feel free to contact me with any questions.

Bruce E. Simmons, CRMP
Reverse Mortgage Manager
American Liberty Mortgage, Inc.
303-467-7821

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

5.0

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!

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Just left us a 5 star review

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John Wickersham
December 22, 2022

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

google
Tim Mallory
November 11, 2022

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

google
Kathleen Mitchell
September 18, 2022

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

google
Mike Hoeffner
August 30, 2022

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

google
Jonathan Maiolatesi
August 22, 2022

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

google
Ronda Giblin
August 20, 2022

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

google
John Bell
August 20, 2022

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

google
Mary Bernard
August 19, 2022

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

google
LESLIE HINES
August 19, 2022

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!