Reverse Mortgage – Your Home, Your Retirement Fund?

One of the largest assets we have as we grow older is our home. We spent hours, days, and months looking at different homes just to pick the perfect one. In years past homes were passed down to the children of the family, but that is becoming less and less. Recent studies have shown a rise in seniors beginning to consider retirement funding strategies that incorporate their home. Many use a reverse mortgage for this purpose.

What is a reverse mortgage?

Financial Freedom Senior Funding Corporation, One of the largest Corporations specializing in the reverse mortgage industry states there are many myths that need to be corrected so seniors get a better understanding of the reverse mortgage.

They list these top ten misconceptions:

1. The bank takes the house OR the borrower can lose the house.

According to Financial Freedom Senior Funding Corporation, the owner retains the title and can not be forced to move out as long as taxes and insurance, and any other property charges (such as sewer and water) are kept current. The home also must be maintained in good living condition. Once the last borrower moves out the loan must be paid in full. A lot of times these properties have equity so family chooses to sell the property to pay off the loan and the balance then can go into the estate or to the borrower if they have just chosen to move.

2. The home must be paid off or be debt-free to qualify for a reverse mortgage .

Your home does not have to be paid in full to qualify for a reverse mortgage . There does need to be adequate equity built up in the property. Reverse mortgages convert home equity into cash. Many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.

3. When a reverse mortgage becomes due, the bank sells the home.

The borrower retains the title to the home so is in full control of the sell of a home or decides if the house is to be sold. This of course is based on the obligations of the reverse mortgage being met as stated above ( ie. Taxes paid, insurance current, etc)

4. It's cheaper to move to a smaller house.

While in some cases this might be true, generally it is not. Each person must look at their own finical statements to determine this. A move can be costly with the general commission one must pay to sell a home, moving cost and the time and effort in finding a home and packing.

5. Children want the home or don’t feel comfortable with a reverse mortgage

Financial Freedom Senior Funding Corporation states they encourage seniors to speak with their children about reverse mortgage . Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.

6. The borrower could end up owing more than the home is worth.

Reverse Mortgages have two safe guards built in, one is that the borrower or his estate can never owe more than the value of the home upon repayment. Also, HECM products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD).

8. There are restrictions on how the money is used.

There are no restrictions. This is your money. It is best to consult your financial advisor but many seniors use the money to pay off other debts, help out children, take a trip, buy a luxury item or simply just live more comfortable.

9. Once the proceeds are received, taxes will need to be paid.

Again, this is your money. You have already paid tax once on it when you earned it. It is recommended that you consult your financial advisor .

10. Reverse mortgages are only for seniors in need, or for the "house rich, cash poor."

Home owners of all kinds have used reverse mortgages. You home does not have to have a set minimum or maximum cash value. Many seniors with multi-million dollar homes are using reverse mortgages as part of their estate or legacy planning in conjunction with advice from financial advisors.

Note about Financial Freedom Senior Funding Corporation, http://www.financialfreedom.com

1 Banting
Irvine, CA 92618
Phone (949) 923-3800

Since 1966 Financial Freedom Senior Funding Corporation has been working to better the lives of seniors across America.

Financial Freedom developed the industry’s first reverse mortgage software, the Reverse Mortgage Analyzer, to help lenders compare the benefits between the HECM, Fannie Mae and the Cash Account products. The Reverse Mortgage Analyzer has been a powerful tool since 1997 and is the industry standard with more than 28,000 registered users. In addition, this RMA software application has been used to train counselors.

Financial Freedom is also founding member of the National Reverse Mortgage Lenders Association. NRMLA is a nonprofit trade association, based in Washington, DC.

Members sign a Code of Conduct pledging to abide by guidelines that assure fair, ethical, and respectful practices in offering and making reverse mortgages to seniors.  For more information, visit the NRMLA Web site at www.reversemortgage.org.