Sasquatch, Martians, and…”The Bank Gets the House”

The law office fills the building’s entire top floor, and lining the reception room walls are newspaper and magazine articles enumerating the firm’s many accomplishments. I knew going into the meeting the attorney was movie-star handsome – I had seen his social media page.

What I didn’t know was his sentiment toward reverse mortgages.

After a brief introduction he got right to the point: “I think I should let you know I don’t like reverse mortgages. I think they’re obscenely expensive, I don’t like the fact the bank gets the house, and I don’t like the fact my client can’t move from the property if she needs managed care later in life.”

Wowzers. This was like a scripted encounter: if he had tried, the attorney couldn’t have come up with three more classic misconceptions about reverse mortgages.

But rather than jumping into an apologetic, I asked the attorney why he thought reverse mortgages were “obscenely” expensive, why he thought the bank got the house, and why he thought his client couldn’t move. He sat silent for fully 20 seconds, and then said, “Are you implying this isn’t true?”

Yup – pretty much.

So for the record, here are some facts about reverse mortgage:

1. The home still belongs to the homeowner. Title doesn’t change, and ownership doesn’t change.
2. A new FHA fee structure means homeowners with a small existing mortgage will see much lower fees than they would have just a couple years ago.
3. The homeowner can move whenever he or she wants. There is no early termination fee, and there are no restrictions placed on how long one must live in the home after doing a reverse mortgage. However, the home must be the primary residence of at least one title holder. If homeowners are absent from the home for more than one full year, for the purposes of the reverse mortgage the home is no longer a primary residence and the loan becomes due.

But back to the attorney: despite initially being an outspoken critic, he was far from being either closed-minded or unteachable, and after we reviewed his client’s numbers he did indeed counsel her to proceed with a reverse mortgage.

But I was left with this thought: I cannot think of any other federally-insured loan that has swirling around it persistent misconceptions. You don’t hear weird things about VA loans or USDA loans. But here’s a loan that literally can change long-term financial survivability in retirement, and some still view it as suspect.

And that’s too bad, because a reverse mortgage can be a financial lifesaver.

So if you have doubts, fears, or just plain-old questions about reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] is a freelance writer and a Reverse Mortgage Consultant at Southern Trust Mortgage. She can be reached at: 703-477-1183, or Laurie@MiddleburgReverse.com