The Top 10 Potential Reverse Mortgage Pitfalls

Top 10 Reverse Mortgage Pitfalls Retirement resources for seniors, their families, and their advisors. Brought to you by MyHECM.com Reverse mortgages are a great financial solution but they're not perfect for everybody. There are some situations where they don't make sense. Before we cover the top 10 reverse mortgage pitfalls let's cover some basics about how a reverse mortgage works. Many supposed reverse mortgage pitfalls are actually misunderstandings about how reverse mortgages actually work. Reverse Mortgage Basics A reverse mortgage is a unique home loan that offers homeowners 62 and older access to home equity without a mortgage payment and without giving up ownership of your home. No mortgage payments are required as long as at least one borrower or non-borrowing spouse lives in and maintains the home and pays the property taxes, homeowner's insurance, and any HOA dues. You remain the owner of your home and you can leave your home to your heirs. Your heirs will inherit the equity in your home whether they choose to keep it or sell it. A reverse mortgage is a non-recourse loan. FHA covers the shortage if your home isn't worth enough to pay off the entire loan balance. Potential Reverse Mortgage Pitfalls There are some reverse mortgage pitfalls that apply to unique situations. Here are the top 10 reverse mortgage pitfalls: 1) Getting married after you get a reverse mortgage. Your new spouse will not be "grandfathered" into the protections that come with a reverse mortgage. If something happens to you, your spouse will have to settle the loan balance to remain in the home. 2) A disabled relative lives with you and you want them to remain living in the home. If something happens to you, your relative will have to settle the loan balance to remain in the home. 3) Leaving your younger spouse off the reverse mortgage to qualify for more money. If something happens to you, your spouse will have to settle the loan balance to remain in the home. 4) You're financially unable to maintain your home or pay the property taxes, homeowner's insurance, or HOA dues. Failing to pay the required property charges could trigger a maturity event and make the loan due and payable. 5) One borrower isn't financially responsible. All borrowers on the reverse mortgage have full access to the funds. If one borrower is financially irresponsible, it may be a bad idea to get a reverse mortgage. 6) You receive disability income or Medicaid. If managed correctly, a reverse mortgage typically won't interfere with disability income or Medicaid. If you have asset or income-based government benefits, make sure you understand how a reverse mortgage can impact them. 7) Changing title ownership after the reverse mortgage is complete. Changing title owners after a reverse mortgage is complete could trigger a maturity event and make the loan due and payable. Check with your servicer before making title changes. 8) Paying your reverse mortgage line of credit to a zero balance. Keep a small balance on your line of credit or it will be closed. Check with your servicer to confirm the minimum balance needed to keep the line of credit open. 9) Paying property taxes, homeowner's insurance, or HOA dues late. Paying the required property charges late could trigger a maturity event and make your loan due and payable in full. 10) Pulling all the money out and putting it into your savings account. This unnecessarily increases your loan balance and interest costs over time. You also may miss out on line of credit growth. Thanks for watching our video on reverse mortgage pitfalls! We hope this was informative. Please click the Like button to help us get the word out. Thank you!