Learn the Truth About Reverse Mortgage Foreclosures

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Let's Talk About the Elephant in the Room


 

You've likely seen negative stories on the news or have read unfortunate accounts of older Americans taking out a reverse mortgage loan and somehow ending up facing foreclosure on their home. 


But are those partial narratives really telling the whole story about reverse mortgage foreclosures? Or are they simply perpetuating common reverse mortgage myths? 


The fact is over 1 million Americans have benefited from reverse mortgages since the federally-insured* program began in 1989, despite what many have been led to believe. 


Is a Reverse Mortgage Right for You?

 

All Mortgage and Home Equity Loans Have Borrower Obligations

 

Not fulfilling the borrower obligations under any mortgage or home equity loan, including any type of reverse mortgage, may lead to serious consequences—even foreclosure. That is why reverse mortgage borrowers are required to take part in pre-loan counseling (which details the loan’s commitments and conditions) before being approved for a reverse mortgage loan. And reputable reverse mortgage lenders, like Reverse Mortgage Funding LLC (RMF), will make every possible attempt to educate borrowers regarding their options to avoid a reverse mortgage foreclosure should the loan become due and payable.

As with any mortgageforward or reverse—you must meet your borrower obligations throughout the life of the loan, including but not limited to: keeping current with property taxes, insurance, and maintenance of the property. In addition, the property must be the borrower’s primary residence throughout the duration of the reverse mortgage loan. If any of these obligations are not met, the loan will become due and payable. 

The truth about reverse mortgage foreclosures is that foreclosure is often the natural resolution of a reverse mortgage after the borrower passes away. When the last surviving borrower passes away or there is no next of kin to handle a sale, the estate will simply allow the home to go into foreclosure, with no penalty to the estate. 

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Reverse Mortgage Borrower Obligations

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PERSONAL & PROPERTY OBLIGATIONS

  • All borrowers on the home’s title must be at least 62 years old, or 60 in certain states with our proprietary Equity Elite product. The older you are, the more funds you may be eligible for
     
  • You must live in your home as your primary residence for the life of the reverse mortgage loan. Vacation homes or rental properties are not eligible for a reverse mortgage
     
  • You must meet with an approved reverse mortgage counselor. The counselor will discuss the loan conditions, associated costs, and your borrower obligations. The goal of the counseling session is to make sure that potential borrowers fully understand and are comfortable with the process and terms of the loan
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FINANCIAL REQUIREMENTS

  • You must show the financial ability and willingness to meet your borrower obligations. These reverse mortgage requirements include:        
    • Paying property-related taxes
    • Paying property insurance
    • Keeping up with regular home maintenance and repairs
 
  • You must own your home outright or have at least 50% equity in your home. Even if you have existing mortgage debt on your primary residence, you may be eligible for a reverse mortgage. The funds from the reverse mortgage would first pay off your mortgage and satisfy any other eligible existing liens before you could use the funds for other things
 

FREE ELIGIBILITY CALCULATOR



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Reverse Mortgage Pros and Cons

PROS of a Reverse Mortgage

  • A reverse mortgage pro is it's a loan option that can help make it easier for homeowners and homebuyers age 60 and older to live a more comfortable retirement.
  • You continue to live in your home and your name remains on the title.
  • You can choose to take your funds as a lump sum; line of credit that you can tap as needed; a steady stream of monthly advances for a set period of time, or as long as you live in the home; or a combination of these options. 
  • No monthly mortgage payments are required for as long as you live in the home and continue to meet your reverse mortgage loan obligations to pay your property taxes, homeowners insurance, and maintain the property. 
  • Closing costs and ongoing fees can be financed with the reverse mortgage loan funds — so out-of-pocket expenses can be minimal.
  • Loan proceeds are generally not considered taxable income.
  • The funds from a reverse mortgage generally do not affect regular Social Security. However, needs-based benefits, such as Supplemental Security Income (SSI), may be impacted. Consult a financial professional or government benefits specialist about your particular situation. 
  • A reverse mortgage loan is a non-recourse loan. This means that neither you nor your heirs are personally liable for any amount of the mortgage that exceeds the value of your home when the loan is repaid.
  • If your home increases in value in the future, you may consider refinancing your reverse mortgage to access even more loan proceeds.
  • After the loan is repaid, any remaining equity belongs to you or your heirs.

If you’re a homeowner who is at least 60 years old, with equity in your home, you may be eligible for this financial solution.

CHECK ELIGIBILITY

CONS of a Reverse Mortgage

  • A con of a reverse mortgage is that the loan balance increases over time as interest on the loan and fees accumulate.
  • As home equity is used, fewer assets are available to leave to your heirs. You can still leave the home to your heirs, but they will have to repay the reverse mortgage loan balance. Usually, the loan is paid off by selling the home. However, this can be done using other funds or by refinancing through a traditional mortgage.
  • Fees for a reverse mortgage may be higher than with a traditional mortgage. (Ask us about our lower-cost options.)
  • Eligibility for needs-based government programs, such as Medicaid or Supplemental Security Income (SSI), may be affected. Consult a benefits specialist.
  • A reverse mortgage loan becomes due and must be repaid when a “maturity event” occurs, such as the last surviving borrower (or, in the case of a HECM, non-borrowing spouse meeting certain conditions) passes away, the home is no longer the borrower’s principal residence. The loan will also become due if the homeowner fails to meet other loan obligations, which include paying their property taxes, insurance, and maintaining the property.

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Reverse Mortgage Funding is a company that provides older Americans with respect, care and trust. Our goal is to help our customers to enjoy their retirement now and in the future with less financial stress and worry.