Reverse Mortgage Myths
With all of the hoopla these days about the Reverse Mortgage for Senior program, it is important that we take a hard look at some of the myths that people are hearing about.
1. The Reverse Mortgage lender will own your home – FALSE!
You and your family or your estate continues to retain ownership of your home at all time that the reverse mortgage is in place. The Lender does not take control of the title. The lender’s interest is limited to the outstanding loan balance, just like a traditional mortgage.
2. Reverse Mortgage lenders just want to sell your house – FALSE!
Lenders earn their income by 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.
3. Your heirs will be saddled with the Reverse Mortgage loan – 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. When you no longer live in the home on a permanent basis, the home must be sold and the reverse mortgage repaid. If you are deceased, the remaining equity would be payable to your estate or heirs.
4. To get a Reverse Mortgage, you need a certain level of income, good credit, or good health to qualify – FALSE!
A Reverse Mortgage has no income, credit, or health requirements. In fact, the terms of a reverse mortgage are dependent on your age, the location of your home and the amount of equity that you have in your home. You can even qualify if you are in bankruptcy action (although this may take a little longer!)
5. You have to make monthly payments on your Reverse Mortgage – FALSE!
In fact, with a reverse mortgage, the only monthly payments that are possible are payments TO YOU! Payment of taxes, insurance and general upkeep of the home are the only responsibilities of the homeowner.
6. To qualify for a Reverse Mortgage Your home must be debt free – FALSE!
Many people getting a reverse mortgage have a traditional mortgage or other debt instrument on your home. The mortgage or debt however, must be paid off first with the proceeds of the reverse mortgage. After this is paid, the proceeds of the reverse mortgage are distributed to you either a lump sum, by regular monthly payments, or though a Line of Credit.
7. With a Reverse Mortgage, Only the “cash poor” or desperate senior citizens can benefit – FALSE!
Everybody has varying levels of cash needs from time to time. An unexpected medical bill or other family catastrophe can be handled gracefully by many with a reverse mortgage. Others like the idea of using the equity in their home for retirement income while still living there. Many folks just like the feeling of financial security they get by having funds readily available. While each of these situations is different, they can all be handled through a reverse mortgage. A Reverse Mortgage can also be an excellent financial or estate planning tool!
While Reverse Mortgages are not for all seniors, they are certainly worth investigating, especially before you need them. When searching for information on Reverse Mortgages, please remember the Law of the Barbershop – “Don’t ask the barber if you need a haircut or you are sure to be clipped!”
If you would check with the AARP in your area, you will likely find counseling and senior citizen classes on the subject of Reverse Mortgages. The are usually free and provide keen insight into this ‘senior only’ program. You’ll be glad you did.