If you watch TV at all, you have probably seen a commercial featuring Tom talking about reverse mortgages. No matter what he is saying, there is something about his voice and direct gaze that really does pull you in. In one spot, he is in a city loft. The ad starts with ominous music and Selleck sounds stern. He then spins around and offers a friendly explanation of reverse mortgages and how people use them. So, how accurate is the advertisement? Is he really telling the truth about reverse mortgages? Let’s take a look and see:
Tom Says: Reverse Mortgages Are Not a Way for the Bank to Get Your House
This is true. You are not selling your home. You are the only person on the title. You retain all ownership.
When you get a reverse mortgage, you are getting a loan. The bank is loaning you money in much the same way as it loans you money when you take a home equity loan. And when you die, the home is still yours to pass on to your heirs.
Tom Says: Reverse Mortgages Are Not Too Good to Be True
There are pros and cons to all financial decisions. However, research indicates that reverse mortgage borrowers are really happy that they secured the loan.
Hundreds of thousands of people have gotten reverse mortgages and an AARP survey found that:
- 94% of borrowers feel that a reverse mortgage has given them peace of mind
- 89% say that they have a more comfortable lifestyle with the loan
- 87% feel that it improved their quality of life
So, one could argue that these borrowers might say that reverse mortgages are not too good to be true. They really are good.
Learn more about the pros and cons of reverse mortgages.
Tom Says: A Reverse Mortgage Loan is a Simple Idea Really
On this point, some people might disagree. A reverse mortgage loan is like a mortgage — but in reverse. The details — like the fact that the loan amount grows because you are accumulating interest — can be tricky to understand.
Another point of confusion is that you have choices for how you take your loan amount and you don’t always have full access to that money.
Other details, like the fact that you will never owe more than the value of your home at the time the loan becomes due — no matter how much you have borrowed — can be confusing.
However, the benefits of the loan really do merit a careful understanding and walk through of your options. And, this is one of the reasons why one of the requirements of the loan is a session with a reverse mortgage counselor.
After you have chosen a lender, you will meet with a counselor. This session is designed to make sure that borrowers understand all of the details of reverse mortgages and their own financial situation.
So, reverse mortgages may not be a simple idea, but one worth investigating.
Tom Says: A Reverse Mortgage Turns Your Home Equity into Cash That You Pay Off When You Leave the House
This statement can be a little bit misleading. It is not incorrect, but not fully accurate either.
Yes, the loan turns your home equity into cash. However, the amount you are eligible to use can vary greatly depending on a number of complicated factors.
The most common misconception about reverse mortgages is that you are eligible to borrow all of your home equity or even the full value of your home. This is not true. You are only eligible to borrow a portion of your home equity.
And, you do not always get your full loan amount in cash. Your loan amount must first be used to pay off any balance of your traditional mortgage — if you have one. Remaining money can be accessed in cash, as a line of credit or as lifetime monthly payments.
Find out how much you are eligible for by using a reverse mortgage calculator.
Tom Says: The Loans Are Used to Pay Off Mortgages, Pay Bills, Pay Medical Bills and Make Updates to Your Home
These are indeed the most popular ways people use money from reverse mortgages.
If you have an existing mortgage, using a reverse mortgage to pay off that loan can have an incredibly positive impact on your monthly budget, even if you cannot access additional money.
Tom Says: A Reverse Mortgage Can Give You Retirement Stability
The reverse mortgage industry is heavily regulated. These loans really are designed to give seniors retirement stability, and over the years the government has continuously refined the program to protect homeowners.
You must undergo a counseling session to secure a reverse mortgage as well as a financial assessment to determine whether or not the loan is a good fit for your future.
So, How Truthful is Tom on the Topic of Reverse Mortgages?
Pretty truthful indeed.
These commercials do a good job of introducing the reverse mortgage product.
However, the decision to secure the loan can be complicated and confusing. NewRetirement offers a Reverse Mortgage Suitability Calculator that assesses whether or not the loan is a good fit for you. So far over 350,000 people have used this tool.
For these people, the strongest reasons to secure a reverse mortgage are:
- The desire for financial independence
- The wish to remain in their own home for the rest of their lives
Find out if a reverse mortgage is right for you.
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