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It's Time to Reverse Your Thinking

Everything about mortgages is better when it comes to Reverse Mortgages

You may have heard that a reverse mortgage has hidden risks. The fact is, a traditional mortgage may not be your safest choice once you approach retirement age.

Here’s why. Homeowners with a traditional mortgage have their wealth tied to their home’s equity. And you can’t easily take advantage of this equity. For instance, you may face sudden medical bills, home repairs, or an emergency.

With a traditional mortgage you can’t access your equity and eliminate monthly mortgage payments. With a reverse mortgage, you can.

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Reverse Mortgage Myths vs. Facts

A Reverse Mortgage is a loan of last resort for desperate people.

FACT

Reverse Mortgages have evolved from strictly a needs-based product to a solution that many financial planners recommend as an important component of a comprehensive retirement plan and a retirement income strategy. Among the reasons people use a Reverse Mortgage are the ability to supplement income and increase monthly cash flow, increase access to liquid assets, extend the life of other financial assets, minimize income taxes, and gain financial flexibility in retirement.

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Reverse Mortgage Myths vs. Facts

When you get a Reverse Mortgage, the Bank owns the home, you no longer do.

FACT

This is by far the number one misconception that people have. The truth is a homeowner retains title and 100% ownership with a Reverse Mortgage.

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Reverse Mortgage Myths vs. Facts

The bank gets your home when you pass away and not your children or other beneficiaries.

FACT

When a homeowner passes away, their ownership interest goes into their estate or is transferred to the joint tenant the same as if there were not a Reverse Mortgage on the property.

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Reverse Mortgage Myths vs. Facts

My kids or other beneficiaries will be on the hook for a big liability.

FACT

Borrowers can leave their home to their kids or other beneficiaries. When the borrowers pass away, the beneficiaries have the same options as they do if there is a regular mortgage on the property. Additionally, a Reverse Mortgage is non-recourse so the beneficiaries are never responsible under a Reverse Mortgage.

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Reverse Mortgage Myths vs. Facts

The bank can foreclose if you owe more than the house is worth.

FACT

The only requirements to remain in the home are that the property taxes and insurance are paid, the HOA dues (if applicable) are current, the house is reasonably maintained, and that the last surviving borrower or an eligible non-borrowing spouse does not vacate the house for more than 12 consecutive months. Even if you owe more than the house is worth, the bank CANNOT foreclose if you continue to meet these requirements.

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Reverse Mortgage Myths vs. Facts

You can only get a Reverse Mortgage if you do not currently have a mortgage.

FACT

This is not true. One of the primary benefits of a Reverse Mortgage is the ability to pay off an existing mortgage and not have monthly payments for principal and interest.

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Reverse Mortgage Myths vs. Facts

My spouse can be forced to move out of the home if I die.

FACT

Borrowing spouses and eligible nonborrowing spouses can remain in the home after the co-borrower or the primary borrower passes away. The spouse only needs to continue to meet the conditions of the loan (see myth 5). In many ways this provides more protection than a regular mortgage. This factor is one of the prime non-financial benefits of a Reverse Mortgage.

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Reverse Mortgage Myths vs. Facts

I cannot ever sell my house if I have a Reverse Mortgage.

FACT

While a Reverse Mortgage is better suited for people who plan to remain in the home long-term, if circumstances change the home can be sold at any time. You simply sell the home, pay off the balance with the proceeds of the sale, and the remaining equity is yours to keep. No different than any other mortgage. A Reverse Mortgage does not have a prepayment penalty.

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Reverse Mortgage Myths vs. Facts

Social Security and Medicare will be affected.

FACT

A Reverse Mortgage will not have any effect on your Social Security payments or Medicare benefits. However, there could be an impact on Medicaid or other public assistance programs that are means tested. Talk to your adviser to make sure you fully understand the impact if you have means tested benefits.

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Reverse Mortgage Myths vs. Facts

I will have to pay taxes on the money I get from a Reverse Mortgage.

FACT

The proceeds from a Reverse mortgage, whether paid in a lump sum or periodically, are not subject to income tax. Consult a tax advisor for more information.

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Reverse Mortgage Myths vs. Facts

Reverse mortgages are extremely costly.

FACT

The fees will vary depending on the type of Reverse mortgage selected and the strategies that are being pursued. In some (not all) cases the costs will be higher than a traditional mortgage, however, the benefits can be much more significant than a traditional mortgage as well. A cost benefit analysis can be analyzed once there is an understanding of the benefits that can be derived. In most cases, the borrower will include the costs associated in the loan amount and will not have any out-of-pocket costs.

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Reverse Mortgage Myths vs. Facts

Reverse Mortgage interest rates are higher.

FACT

Reverse mortgages are guaranteed by the Federal Housing Authority (FHA). FHA interest rates on a Reverse mortgage are very comparable to traditional mortgage rates.

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Reverse Mortgage Myths vs. Facts

Reverse mortgages have hidden risks that can cost you your home.

FACT

The terms of a Reverse mortgage are very clear. A borrower must pay their property taxes, homeowner’s insurance, keep the property in good repair and must maintain the property as their primary residence. These obligations are not hidden. In fact, it can be argued that a regular mortgage carries substantially more risk of losing the house than a Reverse Mortgage.

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Reverse Mortgage Myths vs. Facts

A Reverse Mortgage will use up all my equity and reduce the amount available for inter-generational wealth transfers to my kids, grandkids or other beneficiaries.

FACT

When used in a strategic manner, the use of a Reverse Mortgage can result in a greater ability to pass on wealth since it can be used to preserve other financial assets that can continue to grow.

What You Can Do With A Reverse Mortgage

You may enjoy even more advantages and benefits as are listed below depending on your personal situation and needs.

Advantages

Pay off your traditional mortgage
Eliminate monthly payments
Free up funds for other bills and liabilities
Assist children of relatives through family emergencies
Purchase a new home

Build Wealth

Minimize income taxes and allow your investment assets to grow
You can choose to delay drawing Social Security
Fill in gaps in retirement planning caused by lower than expected returns

Access a Line of Credit

You can take advantage of a line of credit that increases over time and is accessible for your spending needs.
Make home repairs and renovations
Maintain the value of your home by keeping it updated

Fund Health Care Needs

Fund health insurance and/or long-term care needs
Pay for in-home care or physical therapy following a medical event
Convert a room or basement to a living facility for an in-home caregiver

REAL LIFE EXAMPLE: How a reverse mortgage created a huge benefit for one couple:

Edward and Mary are a retired married couple in their 70s. They own a home worth $400,000 and owe about $100,000 on it. Their monthly mortgage payment runs $1,200. If either Edward or Mary passes on, it leaves the surviving spouse in a difficult financial situation with lowered Social Security benefits.

The couple decide to do a reverse mortgage which gets rid of their monthly mortgage payment, protects Edward and Mary from financial disaster should one of them require long-term care or pass away, and frees up money for the home improvement projects they’ve been wanting to take on.

As you can see, getting a reverse mortgage before unfortunate situations occur provides peace of mind for the couple. Each spouse is protected in any scenario.

Ready to Learn More?

We encourage you to download our Reverse Mortgage Myths vs. Facts brochure for more information.

You’re also welcome to request the free booklets below, which contain comprehensive information. Fill out the form and we’ll mail you the free 4-booklet set.

Yes, please mail me the above booklets.

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Talk to us today and find out how a reverse mortgage can help you reach your financial goals. There is no obligation or cost, just honest and straightforward advice.

We’re experts who deeply understand the options and nuances of reverse mortgages. We can find the most beneficial plan for your specific needs.

Please contact Wayne Tucker at 303-468-1985 | wtucker@spectramortgage.com or

Kim Renquest at 303-468-1985 | krenquest@spectramortgage.com to schedule a time to talk.

“The entire process was timely and complete. The attention to detail was appreciated. Nicely done.” – Marv Achterberg

Additional Resources

Get an initial estimate on how much equity you have in your home with homebot.

Please note that this is just an estimate based on your address and may not reflect the actual value of your home.

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Call us at: 303-468-1985

Spectra Mortgage Corporation
7175 West Jefferson Avenue
Suite 1350
Lakewood, CO 80235

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