• You can remain in your home as long as you wish no matter what is owed the lender. You can never be forced out of your home as long as your real estate taxes and homeowner's insurance are paid and as long as you maintain your home according to FHA standards. And if your spouse is a non-borrower, after your passing your spouse will be able to remain in the home but will be responsible for paying taxes, homeowner's insurance, and other costs that relate to the home. However, if there was a line of credit or monthly proceeds, these will be discontinued.
• You can refinance your Reverse Mortgage again and again as long as there is sufficient equity in your home, as long as the rules set by HUD for refinancing HECM mortgages are followed, and as long as there is a significant benefit to the borrower.
• If you sell the property, you can never owe more than your home is worth. This is because a reverse mortgage is a NON-RECOURSE loan; neither you nor your heirs will ever owe more than the home is worth. Also, the only collateral for the loan is the house, not your personal assets.
• Your assets can be used to satisfy the Reverse Mortgage. Remember, you did not mortgage your personal assets but your home, therefore the house stands for the debt being the collateral that was used. You or your heirs are not personally liable for the reverse mortgage debt, the debt cannot pass to your heirs or to your estate as the house stands for the debt.
• Reverse Mortgages have safeguards: capped interest rates, a limitation on fees, HUD counseling, asset protection, no maturity date (cannot become due during a borrower's lifetime, loan term ends at age 150).
• Use the proceeds however you wish, for long term care or other expenses such as repairs on your home or for enjoyment purposes such as a vacation or a new car purchase.
CONS: THINGS TO THINK ABOUT BEFORE GETTING A REVERSE MORTGAGE*
A Reverse Mortgage has all the typical closing costs of the typical FHA mortgage, but fees are higher than with a traditional mortgage. There is an FHA mandated up-front Mortgage Insurance premium (MIP) of 2% based on the appraised value of your home. If your home, for example is worth $500,000, this fee is $10,000. This upfront fee is not out of pocket but financed as part of your loan. The appraisal fee is anywhere from $450 to $850 depending on the type of home and your location. There are no out of pocket expenses with a reverse mortgage except the appraisal fee and HECM counseling fee. (For manufactured homes, a manufactured home inspection is always required, and it is possible payment will be required up front by the inspection company. Termite or roof inspections generally can be included in the closing fees. It all depends on the company doing the inspection and if they are are willing to wait for your closing to receive payment for their services.
• A Reverse Mortgage can reduce your children's and grandchildren's inheritance. A Reverse Mortgage is a rising debt loan since no mortgage payments are required to be made. A HECM is the opposite of a typical mortgage where equity increases as mortgage payments are made. If you want your heirs to inherit your home, be aware that the equity can decrease especially if you started out with a significant mortgage balance as that balance is now part of your reverse mortgage.
• Short-term reverse mortgages, moving out of your home in less than five years, makes a Reverse Mortgage impractical. It does not make good sense to use a Reverse Mortgage short term due to the closing costs that were charged.