the truth about reverse loans
For many years the Reverse loan had a image problem and prior to them being placed under the auspices of HUD and FHA, they were quite terrible. Generally the client had to buy an annuity with the funds they received and also share their equity with the “lender” and thus the terrible reputation of the loan was created.
But that is no longer true and hasn’t been the case for many years, however the image continues to linger and quite often there is a credibility problem that professionals such as myself, have to address with a potential client in regards to “what they have heard” about Reverse loans.
None of us like to be “sold” anything and we certainly need to feel comfortable with our decision when it involves something as serious as a mortgage. And due to the confusing aspects of the loan it makes it quite challenging to explain it to someone that is considering using the option, because they may need additional funds for cost of living expenses, home improvement or leveraging a retirement saving ( and did I say?), unplanned medical expenses.
And there is high percentage of seniors that are carrying a mortgage burden and making mortgage payments each month on what may now be a “fixed income” and are no longer employed and might be drawing down on their retirement fund each month to pay this ongoing obligation.
The question for those of us in the industry, is how to best address the fears and concerns about the loan and also to transcend the mistrust and doubt as to whether or not they are some sort of scam. A scam to take over the borrower’s home and then “kick them out”.
This conversation will continue in a following post.
There was an interesting column that was written recently in Forbes that questioned why more seniors aren’t researching the benefits of using a reverse mortgage to extend their retirement funds.
I of course, have the answer.
It’s fear and the unwillingness to even speak over the telephone with a qualified Reverse loan consultant. I know, because I speak from experience.
The general public, professionals and the media that continues to churn out inaccurate stories of someone’s bad experience with the loan, is driving a mindless and inappropriate fear about them.
And this idiocy and ignorance is hurting the senior community, because they don’t know what to believe and because of “what they have heard”, they have an opinion that is solely based on hearsay and inaccurate portrayals of the Federal loan program.
The home is the biggest asset anyone has and for a senior, it can be used to help them extend any savings or retirement funds further into the future and pay for medical and caregiving expenses.
Using a reverse loan in lieu of drawing down on any savings or investments, is a smart decision.
Currently, people over age 62 retain $4.08 trillion in home equity. Yes, you read that and it’s a huge number, isn’t it?
But people get weird and defensive when you mention “reverse mortgage”, because of the bad things that they have heard about it
“The biggest hindrance: long-held misconceptions and miseducation of the reverse mortgage product in the eyes of the consumers”. Forbes
I have been a Reverse loan consultant for almost 14 years and it has been a continual struggle to develop consistent business because of the incessant, negative pounding that doesn’t stop.
However, I do feel that it has become less of an issue and there is more positive press than in the past, as professionals and the general public are becoming educated about why this is such a great retirement tool and a positive experience.
Costs have been reduced ( That was always a BIG objection) and with the new Financial Assessment in place, they are safer than ever.
And in closing, it may not be appropriate for everyone, but it’s great to have it as an option, wouldn’t you agree?