The Worst Advice We’ve Ever Heard About Reverse Mortgages

I must be getting cranky in my old age.  I find myself talking back to the “talking head experts” on news programs.  I know they can’t hear me, but just the same they need correction.

 

When the “experts” get on to the subject of personal finances, I hear more unhelpful advice than I can stand.  So here’s my chance to get even.reverse mortgages

 

Here’s a statement that makes my head explode.  A senior borrower on a small fixed income is told by the “expert talking heads” to go apply for a conventional loan or line of credit.

 

Sounds nice, but in today’s credit and loan world it’s not so easy.  Today, borrowers need to qualify for a conventional loan based on income, credit scores and debt ratios.  Seniors living on a fixed income are trying to increase their cash flow, not increase their monthly mortgage expenses.

 

Some experts try to scare away folks from looking at reverse mortgages – which by the way have no monthly payments and can solve cash flow issues.

 

The Worst Advice We’ve Ever Heard About Reverse Mortgages

 

Another piece of bad advice is to tell seniors to sell their homes.  I don’t know about you, but personally, I hate moving – let alone moving an entire household filled with stuff.

 

reverse mortgagesThis expert advice is provided as a means to allow a senior to get the equity out of their home to live on. First, according to AARP, the over-whelming majority of seniors don’t want to move out of their homes. But if a senior chose to swallow the bitter medicine and sell, they will have sales expenses, possible tax consequences and they still have to pay to move and live somewhere.

 

There is no free lunch, although the “talking heads” seem to want to make us think so.

 

The Worst Advice We’ve Ever Hear About Reverse Mortgages

 

The latest scare tactic being promulgated by the “talking head experts” has to do with seniors who have taken out a reverse mortgage and wind up going into foreclosure.  On its face, it is a true statement.  Even though there are no mortgage payments on a reverse mortgage, the senior homeowner still needs to pay their property taxes and homeowners insurance.

 

After all, the reverse mortgage borrower still owns the home and just like any other mortgage, the borrower must continue to pay their property expenses.  Even with reverse mortgages, the obligation to pay taxes and insurance continues on.

 

Unfortunately, even with help from the reverse mortgage, some borrowers still wind up in financial difficulties and can’t pay their property taxes.  But, this is not a unique situation to reverse mortgages – borrowers in any loan type can wind up in this scenario.  It’s sad, but also a fact of life.

 

The Worst Advice We’ve Ever Heard About Reverse Mortgages

 

The last bit of “expert talking head” advice is about the costs of getting a reverse mortgage. Yes, its true, there are costs for these loans and they can be more than the costs of conventional loans.

 

But let’s be clear about costs.  Folks don’t do anything because there is a lesser or greater cost.  People do things if there is a clear benefit that is greater than the cost.  If we were only concerned about costs, nobody would get a moon roof on their car, we would never run air conditioning in our homes and we would only travel greater distances by Greyhound Bus.

 

Sound silly?  It should.

 

In the right situation, a reverse mortage can be a great tool to help keep people living a more comfortable life in their homes.  That’s the crux of the situation – are you getting more benefits than cost.  Will it be a better financial decision for you or not.  The talking heads can’t help with that decision, only you can.

 

For more reading about reverse mortages, please visit Reverse Mortgage Information Center.  You may also want to check out Frequently Asked Questions or if you like drop us a line at Contact Us