CALL US: 703-319-2198

HECM Reverse Mortgage - Understanding the Treatment of Mortgage Debt

HECM Reverse Mortgage - Understanding the Treatment of Mortgage Debt

Is mortgage debt eliminated when you get a Reverse Mortgage?  Some would venture to say the debt is eliminated, however, this is misleading and causes significant confusion and lack of understanding with the program. This concept appears too good to be true and before people figure out the disposition of the debt they often give up on learning about the program often resulting in lost opportunity.

With a Reverse Mortgage your debt is not eliminated.  If you currently have a forward mortgage or traditional home equity line they represent individual deeds of trusts that are paid off when you refinance with a Reverse Mortgage. However, your debt is not eliminated, rather it is replaced with a new deed of trust in the form of a government insured HECM Reverse Mortgage.  So where does the concept of elimination enter the equation?

It is important to note that your mortgage debt is being replaced but that your required mandatory forward mortgage payments for principal and interest to your previous lenders are being eliminated. When a Reverse Mortgage pays off and effectively replaces current mortgage debt on your property you no longer are required to make payments to your lender.  This removes the risk of loss of home by default with your lender(s) as you age and also frees up monthly cash flow that otherwise would have been due the first of each month so you now have more financial flexibility and control of your income and expenses in retirement.

The concept of putting your home to work for you in retirement is a new one for many people.  Understanding the mechanics and exploring the benefits and options can often enhance your safety and security in retirement. For further reference please see Paradox of Aging-Four Bucket Strategy from Sept 2016.

George H. Omilan
President-CEO - NMLS# 873983
Jefferson Mortgage Group LLC
Your local Reverse Mortgage Specialist in Virginia, Maryland, DC and Pennsylvania.  

Questions/Comments encouraged. 

Recent Posts

Blog Tags

Reverse Mortgage Retirement Planning Annuity Traditional Mortgage Fiscal Cliff Medicare Short Sales Debt Mitigation supplemental retirement income Reverse to Purchase Mortgage Retirement income insecurity forgiven mortgage debt mortgage debt forgiveness act solutions for underwater properties home equity access HECM Reverse Mortgage Government insured mortgage lifetime income with a Reverse Loan modification modify your loan with your lender Home Care foreclosure Mortgage Loan Process FHA HUD Construction Loan Hard Money Loan mortgage debt relief act FINRA HECM to Purchase HECM for Purchase Long Term Care Rentership Real Estate Economy Financial Assessments Mortgage Deliquency Seniors Social Security Sandwich Generation Financial Planning private label reverse mortgage growth factor reverse credit line LESA Retirement security assisted living Eligibility for Reverse Mortgage Estate Plan Age in Place downsizing Trump Treasury occupancy requirements Senior Advocate mortgage debt Senior Care Gray Divorce Jumbo Reverse Mortgage Principal Limit Factor Non-recourse loan investor financing No Doc Investor Loans Specialized Forward Mortgages Jefferson Mortgage Group Non QM bankruptcy QM Commercial Real Estate Investor Loans Real Estate Investment Loans self-employed borrower bank statement loan Jumbo Mortgage Loan MIP HECM Changes mortgage Asset Qualifer Asset Based Mortgage VA Low Score VA LOAN manual underwrite Unrestricted Approval success story 2021 Changes Inflation cashflow Blanket Loan Reverse Mortgage Eligibility 55+ Fed Interest Rates Housing Market Housing Prices Mortgage Rates Real Estate Market Diversification Prequalification 2023 changes Lending Limit increase High-Value Homes Business Cash-flow ATR Rule Seller Contribution Low Credit Score Credit Score down to 500 Non-Qualifying Loan DSCR Debt Property-based loan LLC Jumbo Reverse Second Trust Second Trust Second Trust