By Alain Valles
Since 1987, reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs), have been a viable option for hundreds of thousands of qualified homeowners aged 62 and older. Over the past several years there have been many changes made to the program in order to better protect borrowers, with the intent of ensuring that a reverse mortgage is a long term financial housing solution. One example: individuals with credit challenges may have the option of having the lender pay the real estate taxes and homeowner’s insurance for the lifetime expectancy of the borrower. In some cases the cost of obtaining a reverse mortgage has dropped by over 50 percent.
As a result of these changes, public opinion about reverse mortgages has improved. No longer is a reverse mortgage viewed as a “loan of last resort.” Instead, many people are seeing it as a financial tool that may augment a retirement plan and be the solution to remaining financially independent in one’s home. Plus, the combination of increasing property values and the recent increase in the maximum available loan proceeds give borrowers more access to cash if it is ever needed.
It’s time to look again
Few people have taken the time to understand how a reverse mortgage actually works. What are the pros and cons? The costs? Qualifying requirements? How long does the process take? How is it paid back? What happens when the borrower dies? What responsibilities do the children have? How do you access the cash? What about condos or multi-families? What happens if the property value drops? What happens if a property is in disrepair? Is a trust allowed? Is a spouse under age 62 eligible or protected? The list of questions goes on.
You owe it to yourself to talk with an experienced reverse mortgage professional to learn if you meet the lending guidelines and to determine if a reverse mortgage is the right option for you. The loan officer should be an educator, not a sales person. By obtaining all the facts, making a decision will come naturally to you.
“If I had a magic wand…”
“If you had a magic wand, what would you want the next chapters of your life to look like?” This is the question I ask all my clients. For many, the goal is to get out of immediate financial pain. Common needs are to eliminate an existing mortgage payment, increase cash flow, pay off credit cards, pay real estate taxes, or complete a needed home repair. Sometimes there is a health crisis occurring or an adult child needs money. Or, everything is currently fine but they want to have access to cash “just in case.” These are all valid reasons to look into a reverse mortgage.
Start by contacting a reputable reverse mortgage specialist to learn about the merits of a reverse mortgage, examine your options, and determine the best path to secure your financial future.
Alain Valles, CRMP and president of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional in New England. He can be reached at 781-724-6221 or by email at [email protected] Archives of articles from previous issues can be read at www.fiftyplusadvocate.com