Reverse Mortgages a Scam?
Does the bank own my home?
No. The title on the home remains with you. You are borrowing money from the bank and using your home as the security for the loan like a traditional mortgage. Once you move, sell, or pass away, your estate is used to repay the loan. You or your heirs will receive any additional money that is made from the sale of the home after repaying the loan.
Can the bank foreclose on my home?
There is no risk of default as long as you remain current on your homeowner’s insurance, real estate taxes, and home maintenance. These payments can be made easily using the funds (line of credit, monthly installments) you receive from a reverse mortgage.
Can I still pass my home down to my children?
Yes. Your heirs have the first right to your home after you have passed away. However, they must repay the loan that has been taken out before officially owning the home. This could be a small or large amount depending on how much of the loan had already been taken out.
What’s the catch? How does the lender or bank make a profit?
The primary source of income for the lender is the origination fee. This fee is only 1-2% of the total loan value. The fee is paid at the opening of the loan, and it can be paid with the funds received from the reverse mortgage.
As you can see, the drawbacks of a reverse mortgage are few. The obligations can be taken care of using the funds received in the loan with plenty left over to use however you desire!