Unfortunately, for many the reverse mortgage is a product of major misunderstanding. While a reverse mortgage (Home Equity Conversion Mortgage) might not be for everybody, it can be a savior for some.

Approved and insured by the U.S. government, this program is aimed at helping seniors live more comfortably and have financial peace of mind as they continue to live in their home.

A reverse mortgage can increase a retiree’s flexibility to meet spending objectives by integrating an otherwise illiquid asset (home equity) into an overall framework for how to best spend down assets in retirement.

Let’s face it, in the past several years many individuals have found themselves in financial situations that they never imagined. Many are trying to effectively manage their assets but are ignoring what may be their largest asset – their home equity.

Recent regulation changes to federal reverse mortgages have transformed the product from “a loan of last resort” to a viable financial planning tool, says Bankrate in a recent article.

Ramsey Alwin, vice president of economic security for the National Council on Aging, tells Bankrate, “Generally speaking, the new policies strengthen the product, protect the consumer and make it well-poised to be an important long-term financial planning tool, most likely for the more moderate- to higher-income population.”

Here are a few frequently asked questions and answers about reverse mortgages:

  • Who can qualify for a reverse mortgage? Seniors who are 62 or older can qualify for a reverse mortgage on a primary residence. If married, at least one of the couple must be 62 or older.
  • What are the advantages of a reverse mortgage? Some of the significant advantages are: a) remain financially independent, b) stay in your home, c) no monthly mortgage payments required, d) tax-free money, e) freedom and flexibility to use the money as you choose, f) does not affect Social Security or Medicare.
  • Will the lender own my home? NO. You retain title to your property. You still retain title and remain responsible for the payment of property taxes, insurance, utilities, home maintenance and other expenses.
  • Do I share the equity with the lender? NO. If you sell your home, any remaining equity after you pay off the loan belongs to you. When you die, the balance of the sale proceeds will go to your heirs. You, not your heirs, can never owe more than the fair market value of the home.

Don Davis is a reverse mortgage specialist with Yadkin Mortgage, a Division of Yadkin Bank. don.davis@yadkinmortgage.com