Reverse Mortgage Loan Blog

Wanting help to pay their medical bills and provide security for his wife Wilma, Jack Hanson of Pigeon Forge had to find a solution.Medicare was not adequately covering their health care costs.

“Medicare doesn’t help much,” Wilma Hanson said.

The Hansons’ fixed income and medical bills led them to investigate and sign up for a reverse mortgage from Sevier County Bank.

A reverse mortgage is a loan by a bank or lending institution against your home that the homeowner doesn’t have to pay back as long as they live there. Homeowners must be at least 62 years old. When the homeowners sell the house, die or move out, the loan must then be repaid.

Seniors with a reverse mortgage do not pay a monthly mortgage fee to the bank or lending institution during the time they live at the house. Instead they get loan payments themselves. Reverse mortgages are an option for those low on cash, who need help paying their medical bills, or who otherwise might not be able to stay in their homes.

Jeff Axley, assistant vice president of the mortgage loan department at Sevier County Bank, said reverse mortgages can be good for “most folks living on fixed incomes with no savings. We see many people in retirement, who are prime on Social Security. They don’t have enough money to cover expenses, particularly prescription drugs where they pay a lot out of pocket.”

For the Hansons, the process started when Jack Hanson called the bank to find out how the reverse mortgage process worked.

“They sent me a folder on the program,” he said.

When the Hansons signed up for their eight-year reverse mortgage earlier this year, they still had 10 years left on their 30-year mortgage. While they were able to make their mortgage payments, they needed help mostly with medical expenses.

“It helps us all the way around,” Jack Hanson said. “We were on a fixed income and needed to make payments on our bills.”

They decided to do a combination of a lump sum payment to them and monthly payments for a period of eight years. With the lump sum portion, the Hansons paid off medical bills.

Dwight Grizzell, CEO of Mountain National Bank, says people turn to reverse mortgages usually for three reasons: they’re on a fixed income, they’re struggling with the cost of living and they need help with expenses.

The reverse mortgage was “me giving Wilma security for the house if something happened to me,” her husband said.

With temporarily suspending mortgage payments, one may think that there are no disadvantages to a reverse mortgage. However, there are some. A reverse mortgage should never be taken out in place of making traditional mortgage payments, bankers say.

Leslie Atchley, Home Federal Bank mortgage loan officer, supports a traditional mortgage whenever possible.

“I encourage people to stick with a regular mortgage. Then if they’re finding they can’t make regular payments, think about a reverse mortgage,” she said. “A reverse mortgage is not good when they just don’t want to pay mortgages.”

Atchley said some of Home Federal’s reverse mortgages are set up as a line of credit at a fixed interest rate or an adjustable interest rate. She said the reverse mortgage needs to be a permanent thing, not a temporary solution for the homeowner.

Grizzell said some seeking reverse mortgages think the bank will sell the house to pay off the mortgage, but in reality it’s the homeowner’s responsibility to sell the house if that’s what is needed to pay off the loan.

Closing costs on reverse mortgages can be expensive and time-consuming. Atchley said it usually takes a month, not the normal two-week period.

Atchley recommends people seeking such a mortgage talk it over with their lender.

Another misperception people have is that the bank takes ownership under a reverse mortgage. The homeowners are responsible for the maintenance of the house and for paying back the loan to the bank.

“We keep the house up, keep maintenance,” Jack Hanson said. “My only responsibility is to pay taxes and insurance on the house.”

The Hansons are satisfied with their decision.

“The bank couldn’t have treated us more nicer,” Jack Hanson said.

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