in place with the peace of mind of not
having a mortgage payment.
A common area of confusion, or myth,
surrounding a HECM, or reverse mortgage, is that people think it’s the same
as a HELOC or a home equity line of
credit. A HELOC is another form of credit
that uses the home as collateral. A
borrower is pre-approved for a certain
spending amount based on income and
A borrower can draw on this HELOC
credit as needed and within the terms
of the loan, similar to using a credit card.
They are then required to make regular
payments for a fixed term.
There are some distinct differences
between the HECM and HELOC programs, however. The HECM has a clear
advantage over the HELOC in that the
borrower is freed from making mortgage payments.
Another myth that should be dispelled
relates to the ownership of the home
after a reverse mortgage is closed. When
a borrower takes out a reverse mortgage, the title for the home remains
with the borrower. The bank doesn’t
own the home.
The reverse mortgage becomes due
once the borrower no longer occupies
the home as their principal residence,
as the result of death or moving out,
failure to pay the property taxes or
maintain hazard coverage or, lastly,
failure to keep up with general home
maintenance. When one of these events
occurs, the lender will declare the
mortgage due and payable. What has
been borrowed, plus interest, is due to
the lender at that time, and any equity
remains with the borrower.
Reverse mortgages are a great
opportunity for mortgage originators
to grow their business and program
offerings. There is a tremendous upside
to working with senior borrowers and
enhancing their future and retirement
financial needs, such as medical care,
home improvements and entertainment, just to name a few.
Another use of a reverse mortgage
is as a purchasing tool to buy a home.
Seniors are moving, whether it is to
downsize or to be closer to family, and
they continue to be a major force in the
home-purchase market. The benefit of
being able to sell an existing home and
use the proceeds for a downpayment
on a new home as part of a HECM for
purchase loan — which offers the
security of not having a mortgage
payment on that new home — is a
major draw for senior borrowers.
The senior borrower, by taking ad-
<< Separate continued from Page 110 “The reverse mortgage can clearly help seniors
vantage of a reverse mortgage on the
new home, can often buy more home
than they thought they could afford,
or otherwise retain key retirement
assets for the future. Regardless of the
individual reason, the reverse mort-
gage can clearly help seniors secure
their retirement, allowing them to age
secure their retirement, allowing them to age in
place with the peace of mind of not having
a mortgage payment.”