Reverse mortgages can be one of the best tools for helping seniors strengthen their financial security, but they’re often misunderstood.

One common misconception is that the government takes title to your house. That’s false. A reverse mortgage is a lien, like any other mortgage, and the title remains in your name.

Some people also think that the loan ends when one spouse dies. Not true. The mortgage continues as long as one spouse remains in the house. The spouse can live to be 103 and the loan will continue. May it be so. 

For many homeowners, an FHA reverse mortgage is probably the best designed financial program there is to help seniors. It’s meant to use your biggest asset—your home equity—to pay off any current mortgage, eliminating your monthly payment and, in effect, giving yourself a raise. The reverse mortgage is replaced by a mortgage that is paid off when the house sells. After the loan balance is paid, you or your heirs receive any remaining equity.

Another benefit is that without a monthly mortgage payment, you eliminate the chance of losing your home if you are ever fall behind on payments. 

Any remaining useable equity becomes a line of credit, which is a huge benefit. It earns interest, and you can draw on it anytime and use it for any purpose. Only the amount you borrow adds to the loan balance. If you start with no mortgage, the available line of credit may be substantial and the interest earnings significant.  

Hopefully, addressing some common misconceptions will help you make an informed decision. Reverse mortgages are an often-underutilized financial tool because of the misconceptions about how they work.

In this time of uncertainty and rising prices, consider a reverse mortgage to make the best use of your biggest asset and improving financial security. 

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