Why are HECM Reverse Mortgages becoming so Popular?
More and more I’m having conversations with people who ask me why Reverse Mortgages have become so popular. They hear about HECMs on TV and the radio. Their friends and neighbors are doing Reverse Mortgages and talking about how great they are. For a lot of people this growing popularity is confusing because they’ve only heard negative stories about the old Reverse Mortgage.
Yes, the HECM Reverse Mortgage is becoming much more popular. I believe that when I retire in 30 years a Reverse Mortgage will be the primary mode of home financing for seniors. This of course is my own prediction but having worked in this industry for years I’m pretty confident my prediction will come true. My article today is about why the trend is moving toward more people doing Reverse Mortgages.
Why are Reverse Mortgages becoming more common?
There are multiple reasons driving this trend. The first and most important reason is Change.
When I talk about change, I’m talking about the updates FHA has made to the HECM in recent years. The early reverse mortgage (1988-2017) is what I refer to as the “Old Reverse Mortgage”. This version of the loan was a bit of a train wreck. It was designed with the bank in mind. The idea was that the homeowner could live in their home for the rest of their life but when they passed away the bank would get most if not all of the home’s equity. In addition, a high percentage of homes with these Reverse Mortgages were upside-down when the homeowner passed away which left FHA covering a lot of losses.
The changes of 2017 fixed the HECM Reverse Mortgage. The changes lowered interest rates, mortgage insurance rates and loan amounts. The benefit of these changes are:
- The majority of Reverse Mortgages will not cause the home to go upside down.
- The homeowner and estate will retain a substantial amount of equity in the home
- FHA won’t be left with a major burden when the owner passes away.
These changes specifically addressed the problems of the Old Reverse Mortgage and made the future much more secure for homeowners and FHA.
Strategy and Financial planning are another Reason HECMs are becoming more popular. The original Reverse Mortgage had a pretty narrow scope. It served a very small segment of people who had home equity but little to no monthly income. For a very specific few a Reverse Mortgage was a heaven send. But for the other people getting Reverse Mortgages it turned out to be a curse. This is why you hear so much negativity about Reverse Mortgages.
The new Reverse Mortgage is designed to serve those who struggle from month to month, those who have plenty of income and assets and everyone else in between. My more affluent clients love HECMs because of the tax advantages and easy access to large amounts of money. When used properly a HECM Reverse Mortgage is one of the very best financial planning tools available.
Another reason people are turning to Reverse Mortgages is because of necessity. As a whole American’s are living a lot longer but retiring with a lot less in terms of income and reserves. Long term this could end very badly for a lot of people as there isn’t a lot someone can do when they run out of money in retirement.
The video I’ve published with this article goes into greater depth on this topic. You can also click here to watch the full version, “Reverse Mortgage Facts and Strategies”. or Subscribe to my channel on Youtube to see all of the informational videos I’ve produced on the new Reverse Mortgage.
No matter the reason, if you or someone you love would like to know if a Reverse Mortgage is the solution you need, give me a call.
President – Reverse Mortgage Specialist
Heritage Reverse Mortgage
Heritage NMLS #1497455 Trevor’s NMLS #: 267962
1060 South Main Street Bldg. A Suite 101B
St George Utah 84770