Reverse Mortgage Myths

There are many misconceptions and simply bad information about what a reverse mortgage is and more importantly what some of the consequences are regarding a reverse mortgage.  Below are listed some of the most common myths held and the facts behind them.  Hopefully dispelling some of these myths will present seniors with a new opportunity to access some of the wealth they have accumulated over the years. This site is devoted to providing you with accurate and update reverse mortgage information.


 

Myth 1: The lender will own my home

Fact: No! The borrower maintains their home as long as they continue to live in it.  The lender gets paid only when the homeowner leaves the home, at which time it may go to the estate.   The estate may refinance the reverse mortgage, or they may simply give it back to the bank, letting the bank dispose of the home.  Any proceeds above and beyond the note and appropriate fees will go back to the estate.

Myth 2: If my loan is sold, the terms will change

Fact: No! The terms of a reverse mortgage never changer.  Most reverse mortgages are sold to Fannie Mae to generate more funds for additional reverse mortgages, but the terms signed during the closing of the specific loan never change.

Myth 3: I will owe money if the loan amount exceeds the value of the home

Fact: No!  The homeowner will never owe more than the value of the home.  Reverse mortgages are known as Non-Recourse loans so the balance due will never be more than the value of the home, regardless of the amount borrowed.

Myth 4: Social Security, Medicare or medicaid benefits will be affected

Fact: No! A reverse mortgage will not affect a majority of benefits earned by seniors so long as the funds from a reverse mortgage are treated as income and not accumulated.  Programs do vary by state as to specific dollar amounts and you can check with your local “Agency on Aging”, or similar organization.

Myth 5: My heirs will be burdened

Fact: No!  Once the homeowner vacates the house, the heirs have the choice of selling, refinancing or walking away from the home without any obligation or penalty in which they would be held personally responsible for.  Generally the bank will give a nine month reprieve from taking any action.  Should the bank have to take the home back and foreclose upon it, the heirs are not held responsible for any funds that may not cover the balance.

Myth 6: I must be debt free to qualify for a Reverse Mortgage

Fact: No!  You may have a mortgage and other debt on your home so long as it can be paid off with some or all of the proceeds of the reverse mortgage and/or other available funds.

Myth 7: I must be in good health to qualify

Fact: No! Reverse Mortgages have no health requirements

 Myth 8: I must have a steady income and good credit to qualify

Fact: No! A reverse mortgage has not income or credit requirements

Myth 9: Only cash poor or desperate seniors can benefit from a Reverse Mortgage

Fact: No! There are virtually no restrictions on how the funds can be used for a reverse mortgage, so a great deal of seniors may benefit from a reverse mortgage, all depending on what their personal goals may be.

Myth 10: I will owe Taxes

Fact: No! Money received from a reverse mortgage is completely tax free.