I have read so much reverse mortgage info. It sounds like it is not really to help you but for the bank to help themselves. It is designed to make you think they are helping you, but the truth is you are giving away your home. You are selling it to them for a very low price. If you get the reverse loan and die a year later, you have lost your home; you just gave it away, and your family can’t do anything about it and cannot have it even with a will. My social worker told me his friend did that, and they took his home from him because you must sign over your deeds to them, and your home becomes theirs. They can do whatever they want to because the house is theirs. So, I don’t know, you better be careful about people claiming they are helping you. Because it is themselves they are helping. They know if you are 62 and over, you are already looking death close in the face. – Martha
We agree with you on one point… reverse mortgages are not for everyone, and every borrower needs to understand the scope of the loan, what is required of them, and what it will and will not do. Unfortunately, though, that is where our agreement ends!
I do not know your social worker, and I cannot comment on the circumstances his friend went through, but he did not give you accurate information on the HUD HECM Reverse Mortgage loan.
The Truth is, the Title is YOURS.
Firstly, you are not selling your home. You always retain the title, which passes to your heirs, not the bank, should you pass away. When you do finally move out of the house permanently, the loan does become due and payable…but only the amount you borrowed and any accrued interest.
In your example, you stated that if you passed just a month later, you lose your home, and the family would lose all interest as well. This is not accurate, and I hate to hear people spread mistruths such as this.
Disbursement of Fund
There are several ways to receive your proceeds on a reverse mortgage. You can choose a lump sum distribution, a monthly payment, leave it in a line of credit you can access when you want, or any combination of these choices. Once you start the loan, you pay interest only on the portion of the loan that you borrow.
In other words, if you have a Line of Credit available for $100,000 but you only take out $10,000 to do some work on your home, you only pay interest on the $10,000 you received, not on the money you have left in the line (just like a Home Equity Line of Credit or HELOC).
Again, using your example, if you passed one month after you got your loan, your family would have to pay the amount of the loan you took (10,000), any fees you financed, and the interest that accrued, which, at today’s rates would come to about $38 on those amounts.
You Own Your Home
Your family would have the right to decide if they wanted to pay the loan off and keep the house or to sell it and pay the loan in that way. But again, they would only pay any outstanding balance. Your assertion that you “sign a Deed” to the bank is untrue.
You do sign a Deed of Trust or Mortgage (depending on the state in which you live) to secure the loan, but you would sign the same sort of security instrument with any loan. It does not give the lender title to your property. I have seen so many articles written by people who heard something and did a halfway job of researching the loans that it is frustrating that there is so much misinformation available.
Here again, some unknown person who I cannot question to find out what happened (if the person even exists and your friend wasn’t exaggerating) is used as an example of why people need to fear a reverse mortgage when the reported “facts” can’t even be actual.
Counseling & Education
Do not get me wrong, the social worker may have known someone who had something happen, but it is like the old game of operator we all used to play as kids. By the last telling, not much of the statement is accurate. A reverse mortgage does require you to understand the terms and to do your homework.
However, there are counselors approved by the Department of Housing and Urban Development (many of whom provide free counseling) who can tell you the real story of reverse mortgages so you can make an informed decision as to whether this is the right loan for you. Unfortunately, though, too many people hear horror stories like the one you just told that cannot even be true based on the terms of the loan.
I would encourage you not to take my word for it (and indeed not the word of someone who has already given you false information) but contact HUD, AARP, or the National Reverse Mortgage Lenders Association (NRMLA) to get the REAL facts about reverse mortgages.
It may still not be the right loan for you, but at least you will have made that decision based on the knowledge of the truth about the way the program works.
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