I know you’ve heard all the negativities about the history of Reverse Mortgages. And rightfully so, Reverse Mortgages have a rough past. To me the program resembles the growth and evolution of a human growing from infancy to adulthood. Let me explain.
Reverse Mortgage Infancy
The first Reverse Mortgages were done sometime in the 1960’s. But it wasn’t until 1988 that President Regan signed the Reverse Mortgage bill and gave regulatory authority to FHA. So, we can say that 1988 is when Reverse Mortgages were officially born.
From 1988 to the early 2000’s Reverse Mortgages were a lot like a small child. Just trying to figure out it’s place in the world and breaking a lot of stuff in the process. Being so new, FHA didn’t really know what to expect and the result was that the mortgage along with Banks and Lenders caused a lot of problems.
Teenage Reverse Mortgage
The early 2000’s until 2017 were a lot like the Teenage years in the history of Reverse Mortgages. The loan by this point had found it’s place in the world but was still very irresponsible and selfish. Banks and homeowners alike weren’t concerned about the future and cared only about the benefits of today.
Keep in mind that the duration of a Reverse Mortgage is usually 10 to 30 years. So, when you hear about the negative results of a Reverse Mortgage, you’re hearing about it 10 to 30 years after it was created.
Just as you today are likely far more mature and responsible than the you at age 16 the new Reverse Mortgage grew significantly after entering Adulthood.
The New Reverse Mortgage:
Today’s Reverse Mortgage is much more responsible. It is designed to protect FHA, the Banks, and most importantly the homeowner. It provides the immediate financial benefit to Seniors without sacrificing the future. This is accomplished by three primary changes:
- Lower Interest rates and Mortgage insurance rates. My clients today on average have combined rates that are more than 2% lower than people who set up their Reverse Mortgage before 2017.
- Lower Loan Amounts – At first glance you may think this is a bad thing. If loan amounts are lower that means you get less money. This is true, but it also means that your home retains more equity. For most Reverse Mortgages this means the home will likely never go upside down. Contrast that with the old Reverse Mortgage which caused nearly all Reverse Mortgages to go upside down within about 15 years.
- Protection of Surviving Spouses – Surviving spouses have been a primary victim of Reverse Mortgages. As one spouse passed away often a surviving spouse was not allowed to remain in the home. Sweeping changes in this area are insuring that his is a thing of the past.
The Future Reverse Mortgage
As time passes the history of Reverse Mortgages will continue to improve. The negative affects of the infant and teenage Reverse Mortgage (which we still suffer from) will eventually go away and the popularity of Reverse Mortgages will become widespread.
When I retire in 30 years a Reverse Mortgage will be as common with Retirees as a 30 yr fixed is with pre-retirees. Like pulling Social Security Benefits it will just be something you do when you retire.
If you haven’t already, take the time to learn about the New Reverse Mortgage and how it would be a benefit to you. You can watch our full Reverse Mortgage video on Youtube or give me a call directly at (435) 359-9000.
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