Reverse mortgages also known as Home Equity Conversion Mortgages (HECM) have gotten a bad name due to a serious misunderstanding. Based on misleading news stories, many homeowners believe that the lender can literally sell the home out from under them. That is not true. The loan does not come due until the last person on the reverse mortgage has passed away. At that point the heirs have the opportunity of reclaiming the property by paying off the reverse mortgage debt.
Here is where problems arise. Let's say an elderly couple have a son living with them. The elderly couple needs cash for medical bills and living expenses so they take out a reverse mortgage. The son is not on the mortgage. When the last person on the mortgage passes, the reverse mortgage becomes due in full. In all likelihood, the son will not be able to pay off the mortgage. In that case he will indeed have to move out as the bank will sell the property. But note that the son had no ownership interest in the first place and was not on the reverse mortgage. So this is how the rumors of people being "thrown out of their houses" get started.
Reverse mortgages are not for everyone but they can be an excellent option for people over the age of 62 who have a lot of equity in their homes and need cash for other reasons. Those reasons can be as varied as living expenses, medical bills, a vacation home, a new car, sending a grandchild through college etc.
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You will have many options when doing a reverse mortgage. You can take out a monthly payment for the rest of your life, a large lump sum up front or a combination of the two.
For more information contact: Dale Athanas, Loan Officer, NMLS#1065087, Northeast Financial Mortgage, 860-876-0466, dale@daleathanas.com
