Misconceptions About Reverse Mortgages
Myth #1: The lender will own your home.
False - You and your family or your estate
continue to retain ownership of your home. The
lender does not take control of the title. The
lender's interest is limited to the outstanding
loan balance.
Myth #2: The reverse mortgage requires
that I make monthly payments.
Not True - There are never monthly payments. The
borrower is responsible for payment of property
taxes, insurance, and general upkeep of the home
and nothing more.
Myth #3: My children will be held
responsible for repayment.
False - The reverse mortgage is a non-recourse
loan. This means that the lender can only derive
repayment of the loan from the proceeds of the
sale of the property. Even if a catastrophe
strikes and the value of the home is reduced,
you or your estate can never owe more than the
value of the home.
Although your heirs will not be responsible for
repayment, they will have the option of repaying
the loan and buying the house for themselves.
Myth #4: You need a certain level of
income, credit, or health to qualify
False - A reverse mortgage has no income,
credit, or health requirements.
Myth #5: To qualify, my home must be debt
free and paid off "Free & Clear".
Not True - You may have a mortgage or other debt
on your home. The mortgage or debt however, must
be paid off first with the proceeds of the
reverse mortgage In fact, many people get a
reverse mortgage just for this reason: to get
rid of their monthly payments forever.
Myth #6: Reverse mortgage lenders just
want to sell your house.
False - Our lenders are in the business of
helping you keep your home and meet whatever
financial needs you may have in order to help
you maintain financial independence. reverse
mortgage borrowers may remain in the home for as
long as they wish. However, should they decide
to sell the home for any reason, the loan would
then become due and payable.
Myth #7: If I do a reverse mortgage I will
have nothing for my kids.
False - "Retained Equity" is a very important
concept to grasp. Realize that your property
will continue to appreciate (the whole value of
the estate) and you pay interest on only the
smaller amount borrowed. Please consult your
representative for amortization tables that
might apply to your specific situation.
Myth #8: If I get a reverse mortgage, I
cannot sell my home.
False - If you decide to sell your home, the
reverse mortgage is like any other loan that
must be paid off at closing. There are no
restrictions on prepayment or penalties for
paying off your loan or selling your home.
Myth #9: If my lender changes, my loan
terms can change.
Not True - A reverse mortgage is secured by two
Deeds of Trust. Once executed, the terms are
defined and cannot be changed as long as the
deeds remain in force.
Myth #10: My Social Security,
Medicare/Medicaid benefits will decrease.
Not True - Generally the money from a reverse
mortgage is considered borrowed money and not
income. For some programs, monthly draws must be
spent and not accumulated, but for most the
money is not considered disqualifying. Please
consult with an advisor or your local Agency for
Aging for your specific situation.
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