Myths

I would be selling my house to the bank

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 sell your property any time after your reverse mortgage. The lender will be paid the balance due and you are entitled to your remaining equity.

My heirs won't inherit anything

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.

I might "outlive" the loan

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.

I could get forced out of my home.

FHA/HUD reverse mortgages specifically state that you can not be forced out of your home.

Social Security and Medicare will be affected.

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.

I would have to pay taxes on the reverse mortgage.

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.

There are big out-of-pocket expenses.

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.

A reverse mortgage is similar to a home equity loan.

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.

I must be debt free to qualify.

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.

Will I owe money if the loan amount exceeds the value of my home.

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.

My loan terms will change if my loan is sold.

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.

My heirs will be burdened.

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.

I must be in good health to qualify.

There are no health requirements.

I must have a steady income to qualify.

There are no income or credit requirements.

Reverse mortgages only benefit desperate and "cash poor" senior citizens.

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.

I must have a good mortgage payment history to qualify.

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.