|
Myth
1. I would be selling my house to the bank
Fact : You and your heirs maintain the title to
your home. The lender will add a lien on the property but you will
still have complete control over it. In other words, you may decide to
sale your property any time after your reverse mortgage. The lender
will be paid the balance due and you are entitled to your remaining
equity.
Myth 2. My heirs won't inherit anything
Fact: Your estate only owes the balance on the
reverse mortgage. The balance is however much you've borrowed plus
accrued interest.
Let's assume you decide to sell your home 5 years after obtaining a
reverse mortgage. Furthermore, assume you owe $50,000 on the reverse
mortgage and your home is worth $250,000. The lender is paid the
balance of $50,000 and you receive the balance of your equity -
$200,000.
Back to Top
Myth 3. I
might "outlive" the loan
Fact: FHA/HUD reverse mortgages are designed
specifically so that you can't outlive the loan. At time of closing,
you will pay 2% to HUD for mandatory FHA mortgage insurance. This
insurance guarantees that even if you live to be 100, you can never owe
more than the value of your home and you can never be forced to leave.
Back
to Top
Myth 4. I
could get forced out of my home.
Fact: FHA/HUD reverse mortgages specifically state
that you can not be forced out of your home.
Back
to Top
Myth 5.
Social Security and Medicare will be affected.
Fact: Money from a reverse mortgage is not
considered income because it is a loan even if you elect to take the
money in a lump sum. No matter how you elect to receive your reverse
mortgage benefits your Social Security and Medicare benefits will not
be effected.
A reverse mortgage does NOT affect these or most
other means tested benefits. If you receive Supplemental Security
Income payments, you must spend the proceeds from the reverse mortgage.
In short, the monthly cash advances need to be fully spent every month
and not accumulated. It is advisable to check with your local area
agency on aging since programs do vary by state.
Back
to Top
Myth 6. I
would have to pay taxes on the reverse mortgage.
Fact: Even though you are not required to make
monthly mortgage payments, the proceeds are considered a loan and as
such are NOT taxable. Of course, you will still be responsible for
payment of annual real estate taxes.
Back
to Top
Myth 7. There are big out-of-pocket expenses.
Fact: You may elect (as most everyone does) to
finance all of your closing cost. Thus for the vast majority of
borrowers there is no money required at time of closing.
Back
to Top
Myth 8. A
reverse mortgage is similar to a home equity loan.
Fact: There are three good reason why a reverse
mortgage is NOT similar to a home equity loan.
(1) Most Home equity loans have some qualification
requirements. A reverse mortgage does NOT require an analysis of your
income, existing monthly debts, and we do NOT consider your credit
rating when approving your reverse mortgage.
(2) You can "outlive" a home equity loan and end up being foreclosed on by the bank. This can never happen with a reverse mortgage insured by HUD.
(3) A reverse mortgage usually has significantly lower interest rates.
Back
to Top
Myth 9. I
must be debt free to qualify.
Fact: You can still qualify if you have an
existing mortgage or other home-related debt. However, the proceeds of
the reverse mortgage must be used to pay off those debts.
Back
to Top
Myth 10.
Will I owe money if the loan amount exceeds the value of my
home.
Fact: A reverse mortgages is a "non-recourse"
loan, meaning that you as the borrower can NEVER OWE MORE THAN YOUR
HOME'S VALUE, regardless of the loan balance.
Back
to Top
Myth 11.
My loan terms will change if my loan is sold.
Fact: The terms of your loan can NEVER change. In
the end all loans end up with Fannie Mae. At closing you sign legal
documents, ensuring that your loan's terms cannot change.
Back
to Top
Myth
12. My heirs will be burdened.
Fact: The loan may be repaid from the sale of the
home or by refinancing the existing reverse mortgage. All remaining
equity belongs to the heirs/estate. You have six months (in some cases
up to 1 year) to repay the reverse mortgage.
Back
to Top
Myth 13.
I must be in good health to qualify.
Fact: There are no health requirements.
Back
to Top
Myth 14.
I must have a steady income to qualify.
Fact: There are no income or credit requirements.
Back
to Top
Myth 15.
Reverse mortgages only benefit desperate and "cash poor" senior
citizens.
Fact: It is true that some seniors may have
greater need than others for cash or an increased monthly income. It is
also true that a reverse mortgage can be an excellent financial estate
planning tool for any senior that has sizeable equity in their home.
Back
to Top
Myth 16.
I must have a good mortgage payment history to qualify.
Fact: Your mortgage payment history is NOT
considered for a reverse mortgage. In fact, we have helped many people
that were severely in the arrears on their present mortgage obtain a
reverse mortgage.
Back
to Top | 