Reverse Mortgage Myths

If I take out a reverse mortgage the lender will own my home.

This is probably the most common of the reverse mortgage myths out there. The fact is that you retain title and ownership to your home, and can choose to sell your home anytime you wish. The lender cannot force you from your home or foreclose on you as long as you maintain your home and pay your property taxes and homeowners insurance. The lender only has a security interest in your home in the form of a first mortgage or trust deed, just the same as in a regular forward mortgage.

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My children or heirs will be responsible for the repayment of the loan.

This is another of the common myths. A reverse mortgage is a non-recourse loan, which means that your house stands alone for the debt. The lender can only derive repayment of the loan from the sale or refinance proceeds of the home. You or your estate can never owe more than the home’s value at the time the loan is repaid.

I must own my home free and clear in order to qualify for a reverse mortgage.

Not true. If you have a balance on a mortgage or home equity loan, a portion of the proceeds from the reverse mortgage will be used to pay off your existing loan, thereby eliminating your current house payment. You are then free to do whatever you wish with the remaining funds available to you from the reverse mortgage.

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I must have good credit to qualify for a reverse mortgage.

Once again, this is another of the more common myths. Your credit is not even a consideration when applying for a reverse mortgage. The lender does run a credit report, but it’s only to see if you have any outstanding government debt, like back taxes. If you do, then those debts must be repaid from the proceeds of the reverse mortgage at the time you close the loan.

Only the “cash poor” or desperate seniors that failed to plan for retirement get reverse mortgages.

Although some seniors may have a greater need than others for the cash or monthly income, reverse mortgages have become a popular financial planning and estate planning tool. Long term health care insurance and in home health care are popular uses for reverse mortgage proceeds. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

By getting a reverse mortgage I would be living off of borrowed money.

One more of the many myths. The money from a reverse mortgage is all ready your money. It’s just that it’s trapped in your home and not accessible to you unless you take out some type of mortgage. All other mortgages, except a reverse mortgage, require you to make payments back to the lender. But with a reverse mortgage you make no payments because no payments are required. It is essentially a reversed mortgage, you do not repay the loan for as long as you choose to live in your home. You are simply accessing money that is all ready yours through a safe government insured program. And best of all it is TAX-FREE.

When a reverse mortgage comes due, the bank sells my home.

No, this is also a myth. At the time the last borrower permanently leaves the home the loan must be repaid. At that time, you or your heirs can either pay the balance due on the reverse mortgage, through a traditional refinance or from other assets and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.

As you can see, myths and misconceptions abound when it comes to the subject of reverse mortgages. Let us help you understand the whole truth about reverse mortgages and help you determine if a reverse mortgage is right for you.

Dispel The Myths. Download Our Free Guide Here! Everything You Need To Know Before You Consider a Reverse Mortgage.