MSN Money: Reverse Mortgage Facts for Seniors to Keep in Mind

With a wide range of information about retirement financing options available to seniors who are becoming increasingly more tech-savvy with each passing year, it can be difficult to sort out some of the specifically-relevant details that an older American should keep in mind if they’re contemplating taking out a reverse mortgage loan to supplement retirement income. This is why it’s important to keep certain facts in mind about the product category, according to a column published at MSN Money by finance columnist Kathleen Coxwell.

Among some of the facts to keep in mind include the age restriction, in that you have to be at least 62 years old to take out a Home Equity Conversion Mortgage (HECM) which is sponsored by the Federal Housing Administration (FHA), which will also require the prospective borrower to go through the financial assessment process. There’s also no one reason that someone may choose to go with a reverse mortgage option, the article says.

“Reverse mortgages are used by many different types of households, from high net worth couples and individuals who are riding out market swings that are impacting their other investments to families that need additional monthly cash flow to help make ends meet,” it reads. “There’s no one reason to take a reverse mortgage, and there’s no one person for whom the loan is the ‘right’ option.”

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The article also aims to make clear that the homeowner still owns their home, and does not relinquish it to the lending entity.

“Many people erroneously believe that the bank or the government owns your home when you get a reverse mortgage,” it reads. “A reverse mortgage is a loan, and reverse mortgage borrowers hold the title to their homes throughout the entire course of the loan.”

Heirs also have options for a loved one who avails themselves of a reverse mortgage, Coxwell writes. This is because that if they so choose, the heir can pay off the reverse mortgage balance however they choose, though that does not diminish the commonality of the home in question being sold to settle the loan.

“Although it’s often the case that heirs sell the home to repay the reverse mortgage, that is not their only option on these loans. In the case where a borrower has passed away, heirs are entitled to pay off the reverse mortgage through whatever means they choose,” Coxwell writes. “If they are able and wish to repay the loan with outside funds and keep the home, that’s up to them. Many families would rather get a reverse mortgage than lose independence or compromise their quality of life.”

That’s not to say that the product category is without potential negatives for people. Borrowing against your home’s equity has the potential to eat into a senior’s net worth; reverse mortgage television ads can sometimes be confusing in relating all the facts of a complicated financial instrument; and a reverse mortgage may not be a better option than downsizing into a smaller home for some people, Coxwell says.

Read the list of 14 facts compiled by Coxwell at MSN Money.

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  • Kathleen Coxwell needs an educational course on the HECM (Reverse Mortgage)! Her comments are confusing, discouraging and wrong in many ways to any senior Home Owner reading this article!

    Kathleen Coxwell states that negative factors about the HECM include
    the age restriction of having to be at least 62 years old to take out a Home Equity Conversion Mortgage (HECM). She talks about the HECM being sponsored by the Federal Housing Administration (FHA) like it is the plague.

    Kathleen Coxwell also states that the prospective senior borrower is required to go through the financial assessment process.

    Well, if Kathleen Coxwell studied the reasons for the implantation of Financial Assessment (FA), she would realize this turned out to be a positive move for seniors, which also has and will head off many foreclosures in the future!

    Then to add fuel to the Fire, Kathleen Coxwell goes on to say, there is no one reason that our seniors should choose to go with a reverse mortgage option!

    I would say that this article presented by Kathleen Coxwell is false in many ways and very misleading to our senior Home Owner population. I am very disappointed in MSN MONEY for allowing Finance Columnist Kathleen Coxwell to quote all the items she did!

    This is my opinion, but I am sure many will agree with what I am saying!

    John A. Smaldone
    http://www.hanover-financial.com

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