Let’s correct something right up front in the CNBC video and article featured here. Eligible homeowners can have an existing mortgage balance or balances up to 50% or more of the home’s value and still qualify for a HECM loan. References to “no mortgage” or a “small mortgage” are inaccurate, plain and simple.
It is very hard to find good, current information on this government program, though older homeowners today stand a much better chance of getting true facts from the media than even a year or two ago. Recent legislative and regulatory changes have made the program safer and more palatable to the financial advisor community, so accuracy has improved. But until you talk to a professional like myself with many years of originating these loans, please do not assume you know the story. It can cost your client a lot if you do a reverse mortgage the wrong way. It can cost them far more if they don’t do one because of false information.
Aside from that poor guidance about existing mortgages that can be paid off with reverse mortgage proceeds, the CNBC piece we bring you this week is valuable, accurate information. That is largely because a prominent financial advisor and economist provides most of it. It is noteworthy that this article points out the possible negative effects as well. Please see the pros and cons here.