All of us have seen the advertisements on TV about the ‘Reverse Mortgage’ – but how many of us really believe a TV commercial? Is it just a gimmick so the bank to get hold of our house?
Well, the first thing you need to know is, “The bank doesn’t want your house!”
In defense of the banks… Banks make money loaning money for houses, not owning houses. Every foreclosure on their books goes from being an asset (the loan that is earning them money) to a liability and expense that is now costing them money. You can bet, owning houses was never part of their business plan. Suddenly, instead of earning interest, they are paying for maintenance to keep yards cut, repair broken windows, and finally, hiring Realtors to get houses onto the market and sold… usually for substantially less than what was owed.
All this to say, “The bank does NOT want your house.”
So when considering a Reverse Mortgage, the banks will either –
- pay out your current mortgage with nothing owed by you for the rest of your life; or
- if you have a lot of equity or the house is paid for, use that equity to pay you a monthly income.
Either way, the house is still yours. And it’s a win-win since you are getting something you want (peace of mind) and the banks gets what they want (interest). How is this any different than the day you first bought your house?
So now that we’ve gotten past the idea that banks want your house, let’s talk about what’s in it for you?
There are literally millions of seniors out there who do
not have enough set aside to carry them through 20+ years of retirement. They never guessed when they bought the home of their dreams in their 40’s or 50’s, that they’d be unable to afford their house note when they retired… or that their retirement income would be less than what they need to live on.
I have a friend in this situation.… it is often difficult for her to meet her bills and she has to rely on her kids for help. Heck. If she saw a pair of shoes on sale, she couldn’t afford them. So what’s the solution? No one wants to be dependent on their kids. And if we sell the house, then what? We substitute the house note with a rent payment? Not much of a choice, huh.
The Reverse Mortgage is a special type loan that will give you the money to pay off your current mortgage, but instead of collecting monthly payments from you, they will add interest to the loan that is payable only when you die or leave the house… at which point, your kids will sell the house, pay off the bank, and keep any equity remaining.
Even better, if you have a considerable amount of equity in your home, the bank can give you a lump sum of cash or set up a monthly annuity for you… like using your house to pay you a pension each month.
The main thing here is to think of your house as the investment you made a long time ago that can help support you now that you are retired. With the Reverse Mortgage you can stay in your home and not have to impose on your children. And best of all, with additional income, you can pay your bills on time, take care of repairs that come up, and even set aside a little in case you ever need to meet a storm deductible. And yes – even afford a new pair of shoes once in awhile!
For the name of lenders in our area who handle reverse mortgages, drop me a note. I’m here to help any way I can.