MYTHS vs. FACTS
Because these mortgages are different from a traditional conventional loan, some concepts are unfamiliar to the homeowner. And as a result, the facts for participating in one of these programs should be separated from the myths. We have enumerated below some of the most common misconceptions which produce confusion among seniors and/or their children.
Myth: Only single family properties qualify for a Reverse Mortgage.
Fact: Single family- up to four units- condominiums, townhouses, PUDs, and
some manufactured homes are eligible for Reverse Mortgages.
Myth: Because I am receiving an income from the lender, the lender will own my home.
Fact: FALSE. You continue to retain ownership of the home. The lender’s interest is limited to the loan balance and the lender will not take control of the title.
Myth: I will be indebted to the bank if the loan balance exceeds the value of my home.
Fact: You will never owe more than the value of the property regardless of the loan balance. An insurance policy is purchased at the beginning to recover the differences, if any.
Myth: My Social Security, Medicare/Medicaid benefits will be affected.
Fact: The proceeds are tax-free so Social Security and Medicare benefits are not affected. SSI or State program payments could be affected and programs do vary by state so check with your local or State agency from which you are receiving payments.
Myth: My heirs will be burdened with debt when I die.
Fact: Repayment of the loan can be accomplished by refinancing the existing
Reverse Mortgage or with the proceeds from the sale of the home. You have up
to one year to repay the Reverse Mortgage.
Myth: I must be debt free to qualify for a Reverse Mortgage.
Fact: False. You may have a mortgage or other debt on your home. The mortgage or debt must be paid off with the proceeds of the reverse mortgage first and then a determination will be made as to your eligibility for cash benefits. Other debts are not considered in the Reverse Mortgage process.
Myth: I must be in good health to qualify.
Fact: A reverse mortgage has no health requirements.
Myth: I must have a steady income to qualify.
Fact: A reverse mortgage has no income or credit requirements.
Myth: It is said that only cash poor and desperate senior citizens can benefit from a Reverse Mortgage.
Fact: Some seniors have greater needs than others for the cash or monthly
Income. The Reverse Mortgage can be an excellent financial estate planning tool for all seniors with considerable equity in their homes.
Myth: I will owe more taxes because I have more income.
Fact: FALES. Reverse mortgage proceeds are considered borrowed funds and are therefore considered tax free proceeds.
Myth: I can’t sell my property so I’m stuck living in the house.
Fact: It’s your property you can sell at any time. You will have to repay the
existing balance on the reverse mortgage just as with any other mortgage.
Myth: The proceeds from the Reverse Mortgage can only be used for day-to-day
living expenses.
Fact: The proceeds can be used for any purpose, even luxury items. It’s your
funds to utilize as you wish.
Myth: I need to purchase an Insurance policy or investment package as part of my Reverse Mortgage.
Fact: FALSE. There are no requirements for you to purchase any additional products.
We hope this helps you understand the Reverse Mortgage process better. The program is updated often and you should get your facts from a professional Mortgage Broker that handles Reverse Mortgages. They are trained to help you through the process and be available for any questions that may arise during the process.