Top 10 Reverse Mortgage Myths
In this post, we will cover the top 10 reverse mortgage myths. Facts will also be displayed to dispel the myths which linger around this financial product. From bloggers, to children of parents, to actual consumers themselves, there is false information being spread and it is our goal to dispel any myths. Regardless of where they originated.
There is plenty of social proof to back up the claim this is a truly helpful financial product. Just in 2014, over $4,000,000,000.00 in reverse mortgages were completed in the USA.
Top 10 Reverse Mortgage Myths – The Most Common
Reverse Mortgage Myth #1: The lender will own my home as soon as my reverse mortgage closes.
Reverse Mortgage Fact #1: After you complete a reverse mortgage, you still own the title of your home throughout the duration of your life. You will retain all homeowner benefits as if you never completed the reverse mortgage. For instance, if you wanted to sell your home, you are able to do so. The reverse mortgage loan will come due if you opt to sell your home. You must pay homeowners insurance, real estate taxes, and your HOA. You must also have the reverse mortgage home as your primary residence. Should these conditions stay satisfied, your loan cannot come due.
Reverse Mortgage Myth #2: The reverse mortgage will impact my social security and medicare because I will gain access to funds I didn’t have previously.
Reverse Mortgage Fact #2: When you complete a reverse mortgage loan, you are essentially releasing home equity. Meaning, these funds are not considered earned income. Therefore, the proceeds from your reverse mortgage loan closing should have no bearing on your social security payments nor medicare. These entitlement programs are typically considered safe by most industry professionals. You should not lose any benefits. For peace of mind, you may contact your tax professional.
Reverse Mortgage Myth #3: Reverse mortgages are scams that target seniors.
Reverse Mortgage Fact #3: Reverse mortgages are insured by the federal government to ensure a homeowner over the age of 62 never has a bank fail should the homeowner choose a line of credit or installment payments. Furthermore, reverse mortgages are a non-recourse loan. Meaning, you can never owe more than the property is worth. This is a fantastic financial product to those who seek access to funds without increasing their monthly obligations. There are certainly some reverse mortgage companies that have “tricked” seniors into signing up for an annuity or life insurance by putting these contracts into the closing documents of the reverse mortgage. Make sure you find a trust worthy company by checking Google reviews, attorney general complaints, etc.
Reverse Mortgage Myth #4: You cannot use reverse mortgage proceeds anyway you wish.
Reverse Mortgage Fact #4: Reverse mortgage proceeds can be used in anyway the homeowner desires. Whether you wish to further enhance your savings account, retirement account, purchase collectibles, take a dream vacation, or send your grandchildren to college; the choice is yours. You can even opt to purchase another home with the proceeds, so long as your home which you took out the reverse mortgage on is your primary home.
Reverse Mortgage Myth #5: I don’t earn enough income to qualify for a reverse mortgage.
Reverse Mortgage Fact #5: The reverse mortgage was a financial product built for those over 62. It is well known that most over the age of 60 live off social security and have limited earned income, if any. For this reason, many typically qualify for a reverse mortgage. Unlike a traditional mortgage or refinance, you will not have a mortgage payment therefore the criteria for a reverse mortgage is unlike any other mortgage product on the market.
Reverse Mortgage Myth #6: There is no way to get unbiased information about reverse mortgages.
Reverse Mortgage Fact #6: A requirement of moving forward with a reverse mortgage is independent counseling approved by the HUD (Housing Urban Development – A government agency). There are many local HUD approved facilities throughout the country and it can also be done over the phone. It is an informational session to ensure you understand both the pros and cons of a reverse mortgage as well as getting unbiased information.
Reverse Mortgage Myth #7: If my house isn’t paid off, I don’t qualify for a reverse mortgage.
Reverse Mortgage Fact #7: Most homeowners over the age of 62 do not have their home paid off. It is not necessary for your mortgage to be paid off to obtain a reverse mortgage. As long as you have a decent equity, you would likely qualify. This is due to the fact that a reverse mortgage must have first lien position. Meaning, if you have enough equity that the reverse mortgage could pay off your existing mortgage, you would qualify.
Reverse Mortgage Myth #8: My loan will come due if I live longer than anticipated.
Reverse Mortgage Fact #8: Your loan will not come due as there is no time limit on the reverse mortgage loan. Some lenders will make the loan mature once you reach 150 years old. Others will have no time limit whatsoever.
Reverse Mortgage Myth #9: People only need a reverse mortgage if they run out of money.
Reverse Mortgage Fact #9: Many homeowners over the age of 62 are taking advantage of a reverse mortgage to greatly reduce their fixed monthly bills regardless of financial situation. This in turn, opens up free cash flow for investing into retirement accounts and remaining highly liquid. In fact, a HECM for purchase allows a buyer to put down roughly 40% of the homes value and not have a mortgage payment. Rather than put 100% of the homes value down, putting a fraction of this amount allows homeowners to have more liquid funds.
Reverse Mortgage Myth #10: Certified Financial Professionals (CFPs) advise against reverse mortgages.
Reverse Mortgage Fact #10: Reverse mortgages are becoming more and more respected by highly designated financial professionals. This is because this unique financial product is the only of its kind and has its role in supporting a worry-free retirement. Recently, the team at Shop Reverse Mortgages wrote a post regarding a recent CNBC article on reverse mortgages.
For other information on reverse mortgages, feel free to visit our home page. As you can see, the reverse mortgage myths are just that. Myths. Feel free to give us a call today to answer any question you have pertaining to reverse mortgage myths, questions, or concerns you may have.