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Decoding the Hype – Born 2 Impress

If you are of retirement age, you have probably seen a lot of new products and services over the years. Many of them are widely advertised and hyped up, but sometimes they are not what they seem to be. Since a reverse mortgage is only available after you reach age 62, you might have suddenly started hearing a lot of hype about it. For example, you may have heard a rumor that it provides you with free money. Let’s decode some of the hype of reverse mortgages.

True: You Do Not Initially Get a Mortgage Bill

One reverse mortgage rumor is there is no bill to pay. That is at least partially true. You do not receive a reverse loan bill initially. You can spend the money you borrow while remaining at ease and not adding to your monthly bills. However, you do have to pay what you borrow back at some point down the line. You also have to pay interest, which has a lot longer to accumulate than it would with a traditional short-term home mortgage.

False: You Can Borrow All of Your Home Value and Only One Way

The reverse mortgage hype might have you believe that, whatever your home value is, that is how much is available to you. That is not the case. It takes a reverse mortgage calculator, which is an online method for reverse loan amount assessment, to come up with the appropriate figure. The reverse mortgage calculator determines that figure using standards set federally, as well as other parameters.

You might also think you can only get the money you qualify for one way. That is not the case either. You actually have the freedom to choose how you borrow the money. The only thing you cannot control is how much is available to borrow. After the reverse mortgage calculator does its calculations, you can opt for an immediate one-time payment, ongoing smaller payments, or a reverse loan line of credit. The latter is like opening a new credit card account. You are given a cap and allowed to pull out funds as needed until that cap is reached.

False: There is Only One Type of Reverse Mortgage

You have probably heard all about how a reverse mortgage can make your retirement easier. Such advertising makes it sound like a reverse mortgage is one thing. However, there are several types of reverse mortgages. They include proprietary and government-issued loans. They also include standard reverse loans and loans that give extra money for a more expensive property, called jumbo loans.

True: Some Reverse Mortgage Rules Differ

The hype about reverse loans may also have you believe they are all alike in terms of rules, but they are not. Government-issued home equity conversion mortgages are reverse loans that are backed federally. Proprietary loans do not have that same level of federal insurance. What is true is that all reverse mortgages are governed by similar basic rules. For example, all have borrowing caps. However, those caps vary from one type to another.

True: Your Traditional Loan Matters, if You Have One

You have probably heard that you cannot have a reverse mortgage and a traditional home loan at the same time. That is true, but only to a point. The actual rule is you cannot keep and maintain both at the same time. However, you can apply for the reverse mortgage no matter what. You just need to know you have to pay the traditional loan balance immediately with funds released to you if you receive reverse loan approval.

True: You Have to Do Your Reverse Mortgage Homework

A final truth about the reverse mortgage hype is there is a lot of it. You cannot possibly understand the entire process in only a few minutes or with minimal research. You really have to do your reverse mortgage homework. A reverse mortgage counselor is a person who can assist you with that. Make sure the one you choose has no affiliations with the lender most likely to issue your mortgage to ensure you receive unbiased counseling.

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